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The affairs of Mr W E J B Farnham - 1899

Loughborough Herald - 18th May 1899

A Sad Story

At the Leicester Bankruptcy Court, today, before his Honor Judge Wightman Wood, application was made on behalf of Mr Wm Edward John Basil Farnham, formerly of Quorn House, Quorn, Leicestershire, for the debtor’s discharge. Mr Goddard, of London, appeared in support of the application.

The Official Receiver submitted his report on the case, from which it appeared that the receiving order was made on the 17th of March 1894, on a creditor’s petition, and in the County Court of Northampton, the proceedings having subsequently been transferred to that court. At the time of the presentation of the petition the bankrupt was a lunatic, so found by inquisition on the 5th of August 1893, when Mrs Farnham was appointed his committee. The bankrupt was of unsound mind during the whole period of the administration of the estate by the trustee, and so remained at the date of the trustee’s release on 9th July 1898, but he was restored to health in the course of the year 1898, and obtained his “supersedeas” from the Court of Lunacy in November, 1898. In consequence of the state of his mind the bankrupt’s public examination was dispensed with, and no statement of affairs was ever filed, so that the trustee had to rely upon other sources of information in getting in and distributing the estate.

He realised assets amounting to £2,333 16s 6d. Proof of creditors amounting to £13, 826 2s 3d were admitted for dividend of 1s 8 8-8d in the pound was paid.

The trustee brought an action for the recovery of certain plate removed from Quorn House by Mrs Farnham, and claimed by her as having been the gift of her husband. The case ultimately went to the Court of Appeal, who declared the property part of the bankrupt’s estate, but subject to the jurisdiction of the Court of Lunacy. It was sold, and the proceeds applied to the bankrupt’s maintenance so long as he remained a person of unsound mind.

At the date of the “supersedeas” £434 only remained in Court, and by a compromise a sum of £150 recently came into the hands of the Official Receiver, which however, would only suffice for a further dividend of about 2 and a half d in the pound.

The bankrupt was the eldest son of the late E B Farnham, of Quorn House, Leicestershire, who was a man of large property, landed and otherwise, and who was for many years one of the representatives of the county of Leicester in Parliament. Upon his death in 1879 Quorn House and an estate of 514 acres of land adjacent devolved upon his son, the bankrupt. The property was freehold, and was then unencumbered, and was afterwards valued for the trustee in bankruptcy at £58,000. The bankrupt also took a life interest under his father’s will in property producing an annual income of £1,836, and under a marriage settlement executed in 1883 he became entitled to a further £3,000 a year, for his life.

There were four policies of insurance upon his life, the total amount insured being £40,500. The whole of these properties were mortgaged, the mortagees being two insurance companies, and soon after the bankruptcy occurred they brought an action for foreclosure, and obtained a final judgement for £72,993, to be paid on 22nd Jan, 1897. The trustee appeared to have done his best to raise the money on the security of a transfer of the mortgages so that he might have time and opportunity to realise the property in such a way as to obtain a surplus for the benefit of the estate, but although he offered 4.5% interest, he did not succeed, and the estate derived no benefit whatever from the properties.

Besides these properties there were the contents of Quorn House (These had been at one time very valuable). It was in evidence that a valuation of the whole contents of the house was made in September, 1887, for the purpose of insurance, and that the valuation came to £51,574, whereas the amount handed to the trustee by the sheriff as the proceeds of the sale of the bankrupt’s effects in February, 1894, was only £1,421 6s 6d. It was brought to the knowledge of the trustee that a good deal of property had been removed from Quorn House, and he made an inquiry into the matter, and certain witnesses were examined. The plate taken by Mrs Farnham’s instructions was believed not to have been worth more than £4,000. Some valuable furs and other property had been sold by order of the Master of Lunacy to provide a fund for the bankrupt’s maintenance, while a lunatic, and there was no doubt other property, to which Mrs Farnham and others were legally entitled, but whether the very large discrepancy between the valuation of 1887 and the proceeds of the sale was ever cleared up to the satisfaction of the trustee was not known.

Without reckoning the value of the contents of Quorn House, the money actually lost or spent by the bankrupt included the amount raised upon mortgage, nearly £73,000, and sum lost by the creditors, which was about £11,500, or a total of £84,500.

As to how or where the money was lost, there was no direct evidence. Owing to the bankrupt’s state of mind, he could not be questioned upon the subject, and he had made no admissions, so that the Official Receiver had had to depend upon other sources of information. At the time of his father’s death, in 1879, the bankrupt was 23 years of age, and he married in 1882. At what period he first entered on the course of life which ended in the entire dissipation of his property was not known. He seemed to have embarked in undertakings of a speculative character, by which he lost money, more especially in a company known as the Quorn Ranche Company, Ltd., an American company. It was commonly believed that his personal and domestic expenditure was extremely lavish, and there was no doubt that he spent large sums in making additions and alterations to Quorn House, or rather procured the work to be done on credit, as some of his largest debts have been incurred for work so done, and the orders must have been given without any reasonable prospect of payment being made.

Having regard to Section 8, sub-section 3, of the Bankruptcy Act, 1890, the Official Receiver submitted, but with the qualification as to the absence of any evidence from the bankrupt himself, that the bankrupt’s assets were not of a value equal to ten shillings in the pound on the amount of his unsecured liabilities; that the bankrupt had contracted debts provable in bankruptcy without having at the time of contracting them any reasonable or probable ground of expectation of being able to pay them; that the bankrupt had failed to account for the loss of assets, and for the deficiency of assets to meet his liabilities; and that the bankrupt had brought on his own bankruptcy by rash and hazardous speculation, and by unjustifiable extravagance in living. The bankrupt stated that his only present resource was a sum of £354, being the balance left in court of the sums paid in for his maintenance while a lunatic, and that so far as he was aware no property was likely to devolve upon him in future. Nothing more was known as to his future prospects.

Mr Goddard, addressing the Court on behalf of the applicant, said there was no doubt that this report furnished by the Official Receiver was a very black document to deal with, but he thought he would be able to show that the facts referred to were brought about more by misfortune than anything else, and that the bankrupt was much more to be pitied than blamed.

On the 5th August the bankrupt was found a lunatic, by inquisition, and there could be no doubt that for a long time prior to that date he had been very seriously ill, and not in a position to be able to appreciate the condition of his affairs from a business point of view. He was taken to Dr Bailey’s Asylum, Northampton, and confined there until 1895, when the late Lord Justice Kay gave him his partial “supersedias”. He then went to reside with Dr Jeaffreson, of Leamington, with whom he still lived. At Leamington he rapidly recovered, and in November last year Lord Justice Rigby, after a careful examination, was satisfied that he was in a condition to have complete control of himself and his affairs, and hence the present application. For many years prior to his lunacy Mr Farnham was represented, and placed implicit trust in a solicitor, who had entire management of his affairs, and after Mr Farnham had been found of unsound mind the committee got an order from the Court of Chancery that this solicitor should bring his accounts into Chambers. An attempt was made to surcharge them to the extent of £13,000, but for some reason or other the trustee did not proceed further in the matter. Mr Farnham was mow most anxious that these accounts should be re-opened, and he believed he had every prospect of recovering a large sum of money in respect of them.

With regard to the paragraph in the Official Receiver’s report, as to the valuation of the Quorn House, he (Mr Goddard) was told by gentlemen representing the committee that that valuation was excessive to a degree, and also that it included a large number of heirlooms.

The Official Receiver: “ You don’t dispute that it was made?”

Mr Goddard: “ No we don’t dispute that, but I don’t want it suggested that anything was done, either by the bankrupt or his wife, in shape of making away with any of the property.”

Proceeding, Mr Goddard said that with respect to the undertakings of a speculative character, Mr Farnham was in the hands of the solicitor he had referred to, and he believed that his money was being put into good substantial things; but there was no doubt that under the influence brought to bear upon him, he did invest his money in those undertakings. He asked his Honour to consider what was the bankrupt’s position. He had been under a grave disability for a number of years – no doubt for years prior to his bankruptcy, and although it might seem a bold thing to ask for his immediate discharge, yet he did so with some confidence prepared as he was, to make the Official Receiver this offer, namely, that Mr Farnham should have entered against him judgement for the sum of £3,000, which would enable the sum of 5s in the £ to be paid to the creditors. The importance of his discharge to Mr Farnham could hardly be over estimated, because it would enable him to proceed with the inquires he had referred to, whilst the creditors would also benefit to the extent of £3,000.

His Honour: “Do you say the £3,000 will depend entirely upon his success in opening these proceedings?”

Mr Goddard “ Not entirely, but to an extent”.

The Official Receiver said he should be sorry to oppose this offer in principle, because it was not exactly as though they had to do with a trader. The effect of the order, if his Honour made it, no doubt would be that Mr Farnham would get immediate discharge, and an absolute discharge, and the creditors would take their chance of getting their money. If Mr Farnham were a trader that would be a serious matter to consider, because he could go on trading as a discharged man. But in his case that objection did not apply, so that in principle he did not oppose the offer, but he felt, as he did in drawing up that report, that he was very much in the dark, not even having the advantage of being the Official Receiver in the court in which the petition was presented. He was inclined to think that where so large a sum of £13,000 was involved they were hardly yet sufficiently informed as to the rights of the parties to be able to make an order.

His Honour said that this was a case in which, under ordinary circumstances, on such a report as the Official receiver had put before him, as to the bankruptcy having been caused by scandalous extravagance, the Court would refuse the discharge for some period. But, of course, it was quite impossible for him to shut his eyes to the fact that the bankrupt in this case was in a very unfortunate state of health, and it would be obviously wrong to apply ordinary principles to a case of this kind. That which, in the ordinary man, would have been very wrong conduct, and would have made it necessary for that court to suspend the discharge, was explained in this case by the bankrupt’s condition of mind, for it was pretty obvious that throughout the period during which he dissipated his estate, he was not wholly responsible for his actions. That being so, he was willing to grant the discharge. He could either grant it subject to the minimum suspension of two years or he might grant it at once, subject to judgment being entered against the bankrupt by his consent for the sum of £3,000. If he suspended the discharge for two years, the creditors were not likely to get anything more from the estate, as the trustee had considered his claim in respect of the money referred to, and had abandoned it, apparently there was no substantial sum to realise. The bankrupt thought otherwise, and he offered his creditors £3,000 out of the money he believed he would be able to get from this source. He (the judge) expressed no opinion one way or the other as to whether the claim was a good one. It seemed to him tolerably clear, however, that it was more in the interests of the creditors that the should grant the bankrupt his discharge now, subject to his paying that £3,000 if he could recover it, than to grant it subject to judgement being entered against him in favour of the trustee in the sum of £3,000. His Honour added that this judgment was entered unconditionally, and was not restricted in any sense to the success or otherwise of Mr Farnham’s efforts to recover the money in question.

   
 Submitted on: 2010-12-15
 Submitted by: Kathryn Paterson
 Artefact ID: 1041
 Print: View artefact in printer-friendly page

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