Breaking the rules in cross examination

Cross examination is regarded by the public as one of the most exciting parts of a trial. Fictional accounts of cross-examinations on film and television deliver moments of high drama - inevitably ending with the witness being exposed as a cheat or a liar, or uncontrollably confessing to some heinous crime. Think Jack Nicholson in A Few Good Men

This does not happen in real life. Ever.

Cross-examination in civil cases is light years away from what we see on the screen. The effective cross-examiner understands that every question asked in cross-examination can be answered in a way that can cause great damage to his or her case. To mitigate this risk, there are long established “rules” of cross examination, set out in detail in texts such as Iain Morley QC’s The Devil’s Advocate.

Following these rules, most effective cross-examiners ask only questions designed to elicit responses that can be used to make a point in closing submission. The questions are always leading, closed, and the questioner always knows the correct answer.

However, on rare occasion, gifted cross-examiners can not only get away with breaking the “rules”, but can actually make their cross-examination more effective by doing so. The transcript below (the names in have all been changed) is one such example.

This was an unusual case, where the plaintiff alleged that his business partner (the defendant) had acted in bad faith by putting their company into receivership. It was important for the defendant Mr Brown to prove that Mr Smith could not be trusted to appoint a receiver himself.

The transcript below shows a very effective cross-examination, following the normal rules, which establishes that Mr Smith had withheld money from the liquidator of a company he had previously been a director of.

However, on the last page, the cross-examiner, having done a great deal of damage to Mr Smith’s case, breaks the rules of cross-examination to make a very effective point.

The lawyer asking the questions was highly experienced and skilled in cross-examination. He knew the rules, but also knew that the groundwork laid by the previous questioning left the witness in a position of considerable peril. He judged that this would be a time where great benefit to his client’s case could result from breaking the rules of cross-examination.

Accordingly, he deliberately asks Mr Smith if he appreciates that what he has done is theft. This question was not necessary, was not leading, and was not a closed question. It clearly broke the rules. The opposing counsel falls into a trap and objects, on the basis that the answer to the question might incriminate the witness.

This was of great benefit to the defendant’s case. The plaintiff’s counsel, by objecting in this way, highlights to the judge that the plaintiff’s actions might have amounted to criminal behaviour. For a plaintiff who is trying to establish that someone else acted in bad faith, that is singularly unhelpful. The judge’s response is not recorded, but the objection was upheld, on the basis that if the witness did answer the question truthfully, it might establish criminal liability.

That was effectively the end of the plaintiff’s case. The judge’s response to the objection clearly showed that she thought the witness was a thief. The next day, Mr Smith discontinued his claim, and presumably faced a significant award of costs against him.

The moral of the story is that a skilled, experienced cross-examiner can occasionally break the rules, and gain considerable benefit from doing so.

CROSS-EXAMINATION: MR LAWYER

5 Q. Mr Smith I’ve just got a few questions really by way of housekeeping to establish the provenance of some of the documents in the file. If you get volume 1 out, this shouldn’t take too long, just page 215; have you got that?

A. Yes.

10 Q. So that’s just a profit and loss statement for your family trust. I’m just interested; that’s something that either you prepared or you would’ve had prepared under your supervision, correct?

A. Yes.

Q. Yes. All right. And then if we look at the document at page 176, that’s a

15 – the page numbers are the ones in the top-centre, Mr Smith.

A. 176, yes.

Q. Yes. So that’s a general ledger for NewCo International or part of the general ledger I would say, sorry. And, again, that’s something that perhaps you personally wouldn’t have put all these entries in but it

20 would’ve been prepared under your supervision, correct?

A. Correct.

Q. Thank you. And then the document at page 164, that’s the same arrangement of being prepared under your supervision; correct?

A. Yes.

25 Q. Now there are a couple of things that I need you to explain because – for people that are non-accountants. This is a ledger for the SCSL Trust Account, do you see that there?

A. What page is that?

Q. Sorry, page 164 –

30 A. Yes.

Q. – you’ll see it’s a general ledger for NewCo International but you’ll see

–

A. Yes, yes. So the ledger reference 11105, SCSL Trust Account.

Q. So this shows transactions going through the SCSL Trust Account,

5 correct?

A. That's correct.

Q. Yes. Now I think you just need to explain; so SCSL is Smith Corporate Services Limited, correct?

A. Correct.

10 Q. Yes. And Smith Corporate Services Limited was the firm or company through which you practiced before Smith Brown Limited came into existence, correct?

A. Correct.

Q. Now I presume Smith Brown had its own trust account, that’s correct, yes?

15 A. Correct.

Q. And Smith Corporate Services Limited had its own trust account? I’m just checking, I mean the first date is the 1st of April 2006. So am I to take it from that date that you continued to operate a trust account for Smith Corporate Services Limited after Smith Brown Limited was

20 established?

A. Correct.

Q. Yes. And NewCo International is a company that you were a shareholder in, correct?

A. I think my family trust was, yes.

25 Q. Family trust. You were a director of that company –

A. That's correct.

Q. Okay. So is it fair for me to say that you ran your own separate businesses through that trust account on occasion?

A. On occasion, yes.

30 Q. Yes. So what we can see here, I mean so essentially you’re using this like a company bank account almost for NewCo International; that’s what this document shows?

A. Sometimes, yes.

Q. All right. And then just the document at page 161, that’s a balance sheet for NewCo International?

A. Correct.

Q. Yes. And, again, that’s a document that would’ve been prepared under

5 your supervision?

A. Yes.

Q. So whilst you wouldn’t have put the numbers in any of these documents we’re seeing – most likely – or wouldn’t have put most of them, I’m venturing, is that correct?

10 A. I would’ve put some of them in, but staff would’ve put some in as well.

Q. Yes. But you would’ve checked it for accuracy and supervised to make sure it was done properly, correct?

A. Correct.

Q. The document at page 283 that’s just a balance sheet for you personally,

15 correct?

A. Correct.

Q. And is that something that you would’ve prepared –

A. Yes.

Q. – it’s just something that you prepare for your own personal reference?

20 A. Yes.

Q. Okay. Thank you for your help on those documents, Mr Smith. All right, well I just wanted to touch briefly on something that you mentioned – something you said in your brief yesterday. Towards the end of your brief, and some supplementary evidence you gave, you talked about your

25 experience with working in the insolvency area. And I think I saw earlier in your brief that in an early stage of your career you’ve worked as an insolvency practitioner for a year or so in a firm in Tauranga, is that correct?

A. Yes. I don’t think it was for a year. It was a relieving assignment where

30 I was the effecting – the relieving insolvency manager for a period of about five months.

Q. That was in the same firm that Mr White worked in, correct?

A. That's correct, yeah.

Q. He was in charge of insolvency at that firm, correct?

A. That's correct.

Q. You worked with him there?

A. Yes.

Q. So I take it from that, and from what you’ve said in paragraph 284 I think

5 of your brief, that you’ve had quite a bit of experience with liquidations but you’re not going to call yourself an insolvency practitioner as I understand it but you know about liquidations, you know about insolvencies, you know about receiverships, correct?

A. Correct.

10 Q. So you know what happens in a, for example, in a receivership or an insolvency when a company is put into liquidation or put into receivership? You’d be aware that once that happens, the receiver or the liquidator takes over the company essentially, correct?

A. Correct.

15 Q. You’d be aware that when a company’s put into receivership or liquidation, that the receiver or liquidator appointed immediately takes over or is put in control of all that company’s assets, correct?

A. Correct.

Q. And they’re the only person that has the right to deal with those assets,

20 correct?

A. Correct.

Q. And those are obviously fairly basic concepts for someone of your level of experience, correct?

A. Correct.

25 Q. You’re very familiar with them?

A. Yes, yes.

Q. And you have, as well as your knowledge as a practitioner of insolvencies, some of the businesses with which you’ve been involved in the past, you’ve had them put into liquidation at various times as appropriate,

30 correct?

A. Correct.

Q. So for example, your company Downs Construction Limited, you had that put into liquidation, correct?

A. Correct.

And just for the record, that’s the company that’s subsequently changed

its name to Shelf Name Limited, correct?

Yeah.

With Downs Construction, you or your family trust was a shareholder,

correct?

Correct.

You were a director of that business?

Correct.

And NewCo International Limited, that was another business in which

your family trust or you, or interests associated with you was a

shareholder, correct?

Correct.

And I think you were one of four shareholders in that?

Correct.

And you were also a director of that company?

Correct.

And Groan Holdings Limited, that’s a company your interests held a

shareholding in, correct?

Correct.

And you’re also a director of that?

Correct.

And that company, or those three companies, were all put into liquidation,

voluntary liquidation I should say, by the shareholders, correct?

Correct.

Now, unfortunately in relation to those companies, they all involved a

significant shortfall to secured and unsecured creditors; didn’t they?

Correct, including shareholders.

Yes that’s correct, that’s correct. I mean there were no funds to pay –

there were insufficient funds in those companies to pay all the creditors,

and that’s correct; isn’t it?

That's correct.

And significant short-falls. Now if we look at page 229, do you have that?

Yes.

So that’s the final liquidator’s report for NC International which was NewCo International wasn’t it? It just changed its name.

Correct.

Now we see there, there’s a short-fall to creditors of $685,000, correct?

Correct.

And the only funds recovered were $800, that’s correct?

Correct.

Now this liquidator, Kenneth Green, was he a member of NZICA?

No he wasn’t.

Was he somebody who had regularly acted as a liquidator?

Yes.

I’m just wondering how that reconciles with the statement you made in

your evidence, where you said that you preferred to appoint members of

NZICA as liquidators.

Well I guess I had –

Was it perhaps that your experience with this particular liquidator made

you cautious about using non-members of NZICA?

No.

So what’s made you change your mind then? Because you’ve had the

same liquidator appointed to do the liquidation of Groan Holdings,

NewCo International and Downs Cross [sic].

I had a good relationship with this liquidator, a professional relationship.

He was a liquidator did that many liquidations for the IRD. He was a local.

The liquidator you were referring to yesterday was in Palmerston North.

He was also, I suspected, perhaps somebody who could have easily been

manipulated by Mr Gray and Mr Brown.

So Ken Green was somebody who you’d dealt with on a number of

occasions and was happy to use in this situation with

NewCo International, for example?

Yes.

And he’s a person who obviously – so you trusted him to hand him the

assets of these companies and for him to do what he could for the

creditors, correct?

Correct, mmm.

And he’d follow the rules in doing so?

(no audible answer 10:18:39).

Correct?

Correct, yeah.

So if we just talk a little bit about these companies, and perhaps if we turn

to page 342 of volume 1? Now, this is the infamous loan

(inaudible 10:19:15) spreadsheet but don’t get overly concerned, Mr Smith. I’m not getting into time or anything like that. I just want to look – what this appears to record at the top, dated the 4th of the 12th of 2003 is

$100,000 that’s been loaned to NewCo International, is that correct?

Correct, yeah.

And then further on page 343 it records $120,000 loan made to

Downs Construction Limited, correct?

Correct.

And then $100,000 loan from someone called Benoit Wilks, US100,000 I

think, do you see that?

Yes.

Okay, who was that loan to?

That is an associate of the Purples who effectively funded an advance for

US100,000 in relation to an almond venture.

What do you mean “effectively funded”?

Well they sent us the money. Yes, they lent us the money, yes.

Right. So they loaned you the money?

Yes.

Right. Okay. Thank you. And if you just go back to the NewCo loan –

that 100,000 – that’s been loaned by the Purples, correct?

Correct.

And it was a loan to NewCo International Limited?

Yes.

Interest rate was 15%?

Yes.

And the Downs Construction loan, that’s 120,000 again loaned by the

Purples; I take it?

The Purples or their nominee, yes.

Q. Yes. To the Purples’ interest, probably?

A. Yes.

Q. Yes. To Downs Construction Limited?

A. Correct.

5 Q. And at an interest rate of 10%. Now we see there that there was quite a bit of that loan still outstanding at various times but that it was largely paid off, if we look at these figures here, by the 11th of September 2008? I

mean I’m just looking at the numbers there; you’re down to about $3000,

there’s been some big payments and the payments of capital and things

like that, so it’s largely paid off or almost paid off by September 2008;

that’s what that document’s recording, correct?

Correct.

And if we look at what was tendered in repayment of that loan, we see

that there’s first of all a $30,000 lump sum; correct?

Correct.

Then there’s a big payment of 78,000-odd dollars, correct?

Correct.

And then there’s four payments called, “Jag mortgage”, so am I to take it

from that that NewCo International Limited – who’s the debtor –

arranged to pay some of the Purples’ mortgage in part satisfaction of this

loan, is that what –

Correct.

That’s what’s happened, okay. And indeed NewCo International paid,

it looks like, Juliette Purples’s credit card in April 2008; correct?

That's correct.

And again in May 2008 –

Correct.

– a small payment of 100?

Yes.

And then NewCo International paid some accounting fees that were

owed to Smith Brown Limited, is that –

Correct.

That's correct? Okay. And the dates of those you’ve record– this is a

spreadsheet that you have prepared, correct?

A. Correct.

Q. Yes. And the dates of those payments are as accurately recorded by you in that left-hand column there, correct?

A. Correct.

5 Q. I’m just going to hand you a document up. This is just – it’s not in the bundle, no, I don't know quite why it’s not under the liquidated reports...

MR LAWYER ADDRESSES THE COURT – HANDING DOCUMENT TO WITNESS & MR PLAINTIFF’S LAWYER

CROSS-EXAMINATION CONTINUES: MR LAWYER

10 Q. You said it’s the liquidator’s first report for NC International which is NewCo International, correct?

A. Correct.

MR PLAINTIFF’S LAWYER ADDRESSES THE COURT – NOT BUNDLE DOCUMENT / NOT CONCERNED ABOUT PROVENANCE /

15 WITNESS TO READ BEFORE ANSWERING

THE COURT ADDRESSES MR LAWYER – GIVE WITNESS THAT OPPORTUNITY

CROSS-EXAMINATION CONTINUES: MR LAWYER

Q. So if you could just look at that document, Mr Smith, you’ll see that it’s

20 the liquidator’s first report for NC International, or NewCo International as it originally was, correct?

A. Correct.

Q. And it reports or talks about what the company used to do, the events that led up to the appointment of a liquidator; do you see that?

25 A. Yes.

Q. You’ll see that there’s a date in that column near the top that says, “Date ceased trading” is the 30th of June 2007; do you see that?

A. Yes.

And you’ll see that the date of liquidation was the 17th of December 2007,

do you see that?

Yes.

Does that accord with your understanding of when it was put into

liquidation?

Yes. That's right.

And it was put into liquidation by you and your fellow shareholders who

are named under the shareholders section of that little column, do you

see that’

Yes.

Q. Right. And, again, it records preferential creditors and unsecured creditors of $685,000. And the liquidator’s basically saying he’s not sure when this is going to be completed. But we know, from the document we looked at earlier don’t we, that the owner managed to

15 recover $800 in respect of this company; do you agree with that?

A. Correct.

EXHIBIT A PRODUCED – FIRST LIQUIDATOR’S REPORT

Q. So the point about that though, Mr Smith isn’t it, is that this company – you vote, you and your fellow shareholders, to put this company into

20 liquidation on the 17th of December 2007; correct?

A. Correct.

Q. Now if we look at page 173 of the bundle or, sorry Mr Smith, perhaps if we could start at page 164 just so we can get this right. I took you to that document earlier and we agreed that that’s a general ledger for

25 NewCo International Limited showing the funds that it’s put through the Smith Corporate Services Limited Trust Account, correct?

A. Correct.

Q. Yes. And just to clarify this, because I have trouble with it and I’m not saying that Her Honour will have trouble with but it’s a concept that I

30 struggled with, if you go back to page 164 Mr Smith? You’ll see there’s a column that’s headed, “Debit”, do you see that?

A. Correct.

Q. And there are figures there under “Debit”. Now can you confirm to me – I understand that the numbers in the debit column actually represent funds coming into the SCSL Trust Account, is that correct?

A. Correct.

5 Q. Can you just explain briefly why that is? It is because

it’s double entry accounting, I understand.

Effect– Yeah. So effectively if we take, for example, the entry on the

4th of April 2006 which is marked, “Freshco,” that represents an

automatic payment that has come in for $10,080 for food process.

How does that affect the balance? What’s shown by the ending balance

column?

So the ending balance is effectively a running total held in the

SCSL Trust Account.

So what we see on the 4th of April 2006 is that Freshco pays $10,080 into

the SCSL Trust account, correct?

Correct.

And if we follow that across that row, that means that the balance of funds

of NewCo International Limited’s funds that are in the Trust account at

that time are $3432, correct?

Correct. And just to show the Court the other side of that, the earlier

payment on the 1st of April 2006 for $5568.75 represents an orchard lease going out to Whare Roto Orchards Limited.

So the debits are funds coming in, the credits are payments being made

to creditors of the company?

Correct.

So this debit basically records all the funds into and out of

NewCo’ bank account, or sorry, SCSL’s account where it’s holding funds

for NewCo, correct?

Correct.

So if we then get to page 174, and this is just a continuation of the same

ledger isn’t it?

Correct.

So if we get to page 174, we see that as at the 12th of December 2007 or

the – we see that the balance at that stage is $48,898, correct?

Correct.

And then there’s a payment out to the Smith Family Trust on the

17th of December 2007?

Correct.

And that takes the balance down to 44,898, correct?

Correct.

And then what we see here is various payments out of this ledger to various parties until we get down to close to a nil balance at about the 18th of June 2008, correct?

Correct.

So this, if we look at the start of that, the 48,000 at the top of the page,

that’s NewCo International’s money, correct?

Correct.

Why Mr Smith is that money not passed over to the liquidator of

NewCo?

I can’t answer that. I am not sure. I would need to research it.

Well it’s clear isn’t it – we’ve agreed that NewCo went into liquidation on

the 17th of December 2007, correct?

Correct.

And you and your fellow shareholders put it into liquidation, correct?

Correct.

And we know, and you know, that when a company goes into liquidation,

all its assets go to the liquidator, correct?

Correct.

But here we have the sum of somewhere between 48 and 44,000 that

belongs to NewCo and it hasn’t gone to the liquidator at the date of

liquidation, has it?

Ah, no.

And in fact, we’ve looked at the second liquidator’s report, do you

remember that?

Have you got a reference?

Page 229.

Right.

And it says, “Funds recovered, $800,” doesn’t it?

A. Correct.

Q. But we know from looking at page 174 that NewCo International had 44,000 – well, it had $48,898 on the 17th of December 2007 until you took

$4000 out, and then it only had 44,000. So we know that on the date of

5 liquidation, the 17th of December, it had either 48,000 or $44,000 in its

Trust account, didn’t it? Correct.

And you know that those funds belong to NewCo, so that once it’s gone

into liquidation, they need to go to the liquidator, don’t they?

Correct.

But we know from looking at this liquidator’s report that they clearly did

not, correct?

Correct.

Because the only funds recovered are $800 and those were all eaten up

in liquidation expenses. That’s what’s shown at page 229 isn’t it?

Ah, 229.

229, it’s the second liquidator’s report.

Right.

Now, you were the person in control of the SCSL Trust account, weren’t

you?

Yes.

So you supervised all payments out of it and in fact payments weren’t

made without your authority, correct?

Correct.

So if we look at what happened with the money held for NewCo International and the Smith Corporate Services Trust account, if we look down the page to the date of the 23rd of May 2008, this is at

page 174 –

Yep.

– so if you look down to the 23rd of May 2008 date, there’s a payment to

Contract Management Limited.

Correct.

Of $800. Now that’s Ken Green, isn’t it? That’s a payment? So the $800

that’s referred to in this second liquidator’s report, that’s been paid by you

from the Smith Corporate Services Trust account, correct?

Correct.

From money held for NewCo? So that’s the $800 that represents the

entire, entire recovery of that liquidation.

(no audible answer 10:39:46).

And if we look up at the top of page 174, we can see that there have been

quite a number of payments out of NewCo’ Trust account since the date

of liquidation, correct?

Correct.

Now, if we’d been following the law, all of that money should have gone

to the liquidator, shouldn’t it?

Ah, yes. Mmm.

Because as you know and as I know, this is money belonging to

NewCo International Limited, correct?

Correct.

And on liquidation, all of that money should have gone to the liquidator,

correct?

Correct.

And the liquidator should have been able to state that he had recovered

funds of $48,000-odd, correct?

Correct.

And then the liquidator would have been responsible for distributing that

to secured creditors or preferential creditors and then to

unsecured creditors, correct?

Correct.

And in fact if we look at the first report, which was exhibit A, you were just

handed it before, you’ll see down there at point 5, you’ll see the word,

“Creditors,” there’s a preferential creditor which is the IRD, is in there for

$152,000, correct?

Correct.

So you know about liquidations, Mr Smith. That $48,000 ought to have

gone to the IRD, correct?

Correct.

But if we look at what happened to it, we see that first of all on the

17th of December, $4000 of it gets paid out to your family trust, do you see that?

What date’s that, sorry?

The 17th of December 2007.

Correct.

And if we look at the 24th of December 2007, there’s another 3000 paid

out to your family trust isn’t there?

24th of December 2007?

Yes.

Correct.

And then on the 3rd of January there’s 1500 paid to, “Brett,” that’s to you;

isn’t it?

Correct.

And then on the 21st of January and the 31st of January there’s another

1000 and 2000 paid out to you, correct?

Correct.

Same on the 20th of February 2008? See that, 1600?

Correct.

And various other sums, correct? So we’ve agreed that it’s you that’s

responsible for paying these sums out. So it appears that – and I can go

through it individually if you’d like – but there’s something in the region of

$23,200 paid by you from NewCo’ Trust account to yourself or to your

family trust or other interests. Do you accept that?

I... Well, subject to the quantum. I accept that there have been payments

to my family trust over that period of time.

And to you?

And to my interests, and to me.

And this is money that should have been with the liquidator really,

shouldn’t it?

Yes.

And also at the same time, we see that there have been various payments

made to Juliette Purples and Purples – and if we look at those – so I want you

to keep your hand on page 174 but also to open the volume to page 342. So keep page 174 open because we’re going to need to skip to both documents. So if we look for example at the payment that happened on the 8th of April 2008, that’s a payment of $200 to Juliette Purples and

5 that’s the same $200 payment we can see that you apply as a credit against the loan owed to NewCo International on the 8th of April, correct?

A. Correct.

Q. Now you said that the Purples had loaned this money to NewCo International Limited.

10 A. (no audible answer 10:45:53).

Q. Shouldn’t that loan to NewCo International from the Purples, shouldn’t that have been included as an unsecured debt in the liquidation of NewCo International Limited?

A. Well I’m not sure what’s in that figure, but – that the liquidator provided in

15 his report. But the NewCo International debt, it was known by the directors of NewCo International that effectively, that we would all personally contribute to that – that debt, because the directors in NewCo International Limited were also directors in a company called, “Arman Investors Limited” in Australia. And the Arman Investors Limited

20 in Australia company was very profitable, and effectively the directors of both companies considered that their obligations to the Purples would be met from the Arman venture if NewCo International couldn’t pay.

Q. So I think that’s a roundabout way of telling us, Mr Smith, that you had a personal obligation to the Purples to repay this $100,000 debt as well as –

25 well, although it had been loaned to NewCo International Limited, you had some sort of personal obligation to ensure it was repaid as well, correct?

A. Yes, and an agreement with the other directors as well.

Q. Sorry, the other directors had it – so and the other directors, who are

30 they? That’s Steve Wall and –

A. Steve Ward, Michael Hall and Graham Johnson.

Q. Right, so you all had a personal obligation to meet this loan as well as – so even if – well, it was an unsecured loan wasn’t it, apart from –

A. Correct.

Q. So it’s an unsecured debt of NewCo International Limited, correct?

A. Correct.

Q. And if we look at the figures in exhibit A, the unsecured debt there’s 530. And then if we look at the second report at page 229 of the bundle, and

5 you don’t really need to go there but I think you’ll accept, won’t you Mr Smith, that the $685,000 figure of secured and unsecured creditors –

A. Yeah.

Q. – hasn’t changed during the course of the liquidation?

A. No.

10 Q. Correct? So it seems that – well we don’t know whether – it doesn’t appear to be included in that report; the unsecured Purples loan doesn’t appear to be included in this $685,000 figure. But if it is, the liquidator’s not aware of any payments that have been made to the Purples in that period, is he? Because he hasn’t changed –

15 A. That's correct.

Q. – the outstanding debt figure. So if we look at 342 – 174 and you’ve explained to us that there was some personal obligation to you; we accept that, subject to mathematics, you’ve taken $23,000 out of this trust account for you or your interests. There have also been a number

20 of payments out of this trust account, out of NewCo International’s trust account; that reduced the amount of indebtedness to the Purples, hasn’t it? So if, for example, we look down the list; we will see that on the 15th of February 2008 there’s a payment of $3980 made to the Smith Brown Limited Trust Account, do you see

25 that?

A. Have you got reference for me there?

Q. Sorry. Page 174.

A. Yes.

Q. You’ll see there on the 15th of February 2008?

30 A. Yes. Correct.

Q. Paid to the Smith Brown Trust. And then if we look at the NewCo International – or if we look at the document on page 342, your spreadsheet referring – showing how the NewCo debt’s been dealt with,

we will see also on the 15th of February that 3980’s been paid to Mr and

Mrs Purples’s mortgage, correct?

Correct.

So that’s the same number, isn’t it? You’ve paid 3980 out of the

SCSL Trust Account to TOL and it’s been applied against the

Purples’ mortgage, correct?

Correct.

And that’s reduced your indebtedness to the Purples, correct?

Correct.

And if we look down we can see a number of other payments to

Juliette Purples or other payments in that same $3980 amount. Those are

all payments that relate to the reduction in indebtedness we see on

page 342, aren’t they?

Correct.

So if we look at page 174 and look at the number of payments that have

been made; you’ve reduced your indebtedness to the Purples by virtue of

these payments haven’t you?

Correct.

And the number is $20,502 that’s shown being paid out of

NewCo’ trust account to the Purples if we total that up; if we total up the

3980 paid on the 15th of February 2008, if we look at the 200 paid to Juliette Purples on the 8th of April, if we look at the 3980 paid off the mortgage to the TOL Trust, then went to Juliette Purples or to the Purples’ mortgage on the 17th of April, there’s $100 that went to

25 Juliette Purples on the 15th of May, another $3980 mortgage payment on the 15th of May, and various other bits and bobs? You’ll accept that if you add all those payments – well you don’t need to accept it but you can take my word for it. But if you add those payments up it comes to the sum of

$20,000 taken off the Purples’ mortgage including for your obligation to the

30 Purples – including some funds that are paid to Smith Brown Limited in the amount of 3746-odd dollars. Those are all payments for your benefit, aren’t they, because they either – well they either go to the payments that we’ve just been talking about, either go direct to you or your family trust

or they go towards reducing your indebtedness with the Purples don’t

they?

Correct.

So of this $48,000 that belonged to NewCo as at the date of liquidation;

none of it’s gone to NewCo, some small amounts have gone to other

people – like you seem to have paid one of your fellow shareholders

$1000, but none of it’s gone to any other of them. But the payments that

have been to you or to reduce your exposure under the Purples loan total

over $43,000, Mr Smith. That’s all money that should’ve gone to the

liquidator, correct?

Correct.

But the liquidator’s never been told of the existence of this and the

money’s not been transferred to the liquidator, correct?

I don't recall, to be honest.

Well we’ve seen the liquidator’s reports, haven’t we, Mr Smith?

Yes.

None of this money went to the liquidator, did it, or else he’d have –

No, it didn’t.

No?

No.

Except for the $800 that you paid it, correct?

Correct.

So this is money that belongs to NewCo International Limited and, as

you know, had to go into the possession of the liquidator when the

company went into liquidation; correct?

Correct.

Because you know about liquidations, correct, and you know what the

rules are don’t you?

Yes.

So you’ve taken $48,000 belonging to NewCo, to its liquidator, and you’ve

used it for your own purposes haven’t you?

I’ve used it to pay the amounts as specified, yes.

Well, yes, $23,000 to you and your family trust; correct?

Correct.

Q. And another $20,000 to reduce your exposure under the Purples loan, correct?

A. Correct.

Q. So you’ve taken money that belongs to the liquidator of NewCo and

5 you’ve applied it for your own benefit, correct?

A. Correct.

Q. You’d appreciate that that’s called “conversion”, do you know what that is, Mr Smith?

A. No.

10 Q. Well it’s theft, Mr Smith, you’ve taken money that belonged to the liquidator of NewCo and you’ve used it for your own purposes; does that sound a fair description to you?

OBJECTION: MR PLAINTIFF’S LAWYER – WITNESS’S ANSWER LIABLE TO SELF-INCRIMINATE (10:58:00)

Rob Latton9 October 2018

Breaking the rules in cross examination

MR LAWYER ADDRESSES THE COURT – HANDING DOCUMENT TO WITNESS & MR PLAINTIFF’S LAWYER

MR PLAINTIFF’S LAWYER ADDRESSES THE COURT – NOT BUNDLE DOCUMENT / NOT CONCERNED ABOUT PROVENANCE /

EXHIBIT A PRODUCED – FIRST LIQUIDATOR’S REPORT

P:+64 9 972 2060 • M:+64 21 300 062 • E: rob@roblatton.co.nz