PAYMENT OF INTEREST.

Press, Volume LXVIII, Issue 20489, 7 March 1932, Page 10

PAYMENT OF INTEREST.

A CUT ORDERED. INTIMATION FROM AUDIT department. POSITION OF NEW SOUTH WALES INVESTORS. Considerable comment lias been caused by the intimation of the AuditDepartment to local bodies that iiiiciest to be paid to New South Wales holders of debentures must be reduced by 4s 6d in the £. or to a rate of not less than 5 per cent, because of the New South Wales legislation imposing » compulsory reduction of a corresponding amount in all interest payments made in that State. So far as Christchurch local bodies are concerned enquiries made by a representative of The Press revealed that in one case at least the position which will arise if the Audit Department presses the issue will be a delicate one, and one which will possibly result in legal action being taken by debenture holders in Sydney. All local Kodv officials interviewed expressed amazement that, apart from any other consideration, the New South Wales legislation could, be capable of enforcelrient in the Dominion and some openly questioned that point. 1 Drainage Board's Position. The Christchurch Drainage. Board has six- months' interest due to New South -Wales debenture holders on March 31st. on £50,000 worth of 52 per cent, debentures, but has been told-bv the Audit Department that it must make the deduction to conform to the New South, Wales statute. The New Souh Wales legislation provided for a •maximum reduction of 4s 6d in the £, but- the rate of interest must not tall: below 5 per cent. The Board therefore would not be required to take a ' full 4s 6d from each £, but the reduction to 5 per cenC would mean a reduction in interest payments of los in cvtTv £5 los which was the _ present yearly interest on'every £IOO invested. Mr H. S. -Hamilton, a member ot tht< finance committee of the Board said that' it seemed a wrong principle altogether, and one very difficult-to defend, that ratepayers in New Ze.ic nl1 th Wi>les Government. He ten. sure' that there was no desire at their expense, so tai . as , ° l/odies were concerned and the Aud t Department's intimation was extra Bingham,' another member in debentures held in , t l ona '' The £50,000 in New South ' Wales. The Board had been saving money already in exchange rate appreciation in favour of the' Dominion with the interest payable in Australia in each case. we borrowed tfce money on t^ e "of paying certain interest, h<? added, "and we are prepared to pay it. It-is extraordinarily peculiar that an outside body is going to be made of preventing us from doing so. Possible Action. The secretary of the Draiaage Board Afp C F Champion, said that y be made from the Audit Depart, merit.regarding the New^Zealandstatute under which the intimation had oeen l gWen. On the face 6f it it would apwear that the instruction couM haye no standine at law. The New South Wales broker would possibly have to brine action againßt the Board if the Department insisted in its instruction The broker .had already experienced a succession of adverse circumstances, aj the Board had "had the benefit of 8 a per cent, to 18 peir cent, m the exchange rate in making payments, and on top' of that the broker had had. tc pay up to 20 per cent, to send the monej to London, and still more to make pay_ merits in France, where he Bad placec some of the debentures. It seemed in credible, Mr Champion added,' that anj New South Wales statute should be al lowed to affect payments of mteres made from New Zealand.

Some Bodies Not Affected. The Lyttelton Harbour Board has also received its intimation of the Department's decision. Mr C. H. Clibborn, the Board's secretary, stated last night that. there were no debentures of the Harbour Board'# still domiciled in New South Wales. About 18 months ago an arrangement had 'been made that all interest be paid in New Zealand. The loan taken up in New South Wales was part of the £ 60,000 redemption loan! floated some two years ago. If thet arrangement had not been made as stated: above the Harbour Board would have to make the deduction as directed liy the Audit Department. The secretary of the North = Canterbury Hospital Board, .Mr W. S. Wharton, ; stated that that body had no ;debentures in Australia, and a similar position is stated to apply to most of the other smaller local bodies in and around Christchurch. City' Council Involved. The GKristchurch City Council will have to test the validity of the instruction which it has also received/ from the Department if other action does not setle the matter in the next few months. In the»Coancil's case the amount involved is not nearly ,so great as that in the case of the Drainage Board. The Town Clerk,, Mr J. Neville, and the Mayor, Mr D. G. Sullivan, M.P., each explained .that the Council,had not got a very large amount held in debentures in New ■ South Wales. ; The only loan, was one of £SOOO raised' for housing purposes—workers' dwellings—and the last interest payment on that had been made in February. The next interest due would be for the six months ending in ' July, Mr Sullivan .said that although there was no legislation in New Zealand reducing interest rates it was conceivable that the request for the reduction was made by the New South Wales Government, as it was obvious that if such action was not advocated then it .wpuld j be more profitable for New South I Wales investors to place their mosey abroad. Naturally, a saving to local 'todies was welcome but, judging from the little evidence available, the ruling of the Department seemed extraordin-