A DISPUTED POINT.

Dominion, Volume 3, Issue 824, 24 May 1910, Page 4

A DISPUTED POINT.

A point of very great importance in connection with tho Land Settlement Finance Act of last session was referred to by Sir Josepe Ward in his Winton speech. Under this Act, it will be remembered, any five or more persons may form themselves into an association and enter into an Agreement for the purchase of'a block of land from a private owner and receive State assistance in carrying out the purchase. They may not bd" in a position to provide the money to pay for the land, but the State, if it considers the land suitable and tho prico satisfactory, is empowered to advance tho sum required or guarantee debentures issued by the association to cover the purchase. _ The land so bought must be sub-divided into allotments varying from 50 to 200 acres in extent, and each member of the association reooives one of tho allotments. The idea underlying the scheme is, of course, to promote closer settlement by the State assisting groups of settlers to take up land at present held in large blocks b.y a single owner. Tho Act has a good deal to commend it, but unfortunately there appears to bo a flaw in it which will militate seriously against its usefulness. The member for Wakatipu, Mr. ■W. Frasee, appears to have been the discoverer of the weakness in question. I't is simply this: Every member of an association, apparently, is made liable for the pm-ehase-money not only of the particular section allotted to him, but for any default in the matter of payments of any other member of the association. That is to say, if five men combine to take lip land in the manner described, and one subsequently is unable to continue his payments, the four other members become liable for any loss incurred by the State, which has guaranteed tho debentures under which the pur-chase-money was raised. This liability, if, as contended, it exists, is a serious matter for members of such associations. They may be quite prepared to carry out their own obligations, but they very naturally may not care about guaranteeing the payments of their fellow members.

The Prime Minister, as mentioned, referred to this matter in his AVinton spccch and gave a very definite contradiction to tho opinion expressed above. He said:

I want to clear up a misconception which seems pretty widely spread. It has been suggested by some people that each member of the association taking up this land becomes responsible for tho due fulfilment of the obligations of all tho other members of the association. I havo specially asked tho Crown Law officers to carefully study tho statute as it appears on the Statute-book; anil I am advised that there is no liability whatever on the., part of these associations save liability for the purchasemoney of the particular piece of laud each settler takes.

This assurance is emphatic enough, but in facc of tho wording of the Act w» cannot help thinking that the case put to the Crown Law officers has not been quite clearly stated. In Ciause 13 of the Act these sub-sections appear":

(1) All debentures issued by an association under the authority of this Act are hereby guaranteed by tho Government of Mew Zealand, and if and so often as default is mailo by tho association in the payment of any principal or interest duo on any such debenture the Minister for Finance shall, without further authority than this Act, pay out of the Consolidated Fund to tho holder of the debenture the amount so in arroar unpaid. (5) All sums paid out of tho Consolidated Fund in pursuance of this section, together with the interest thereon at the rate of 5 per cent, per annum, shall constitute a debt due by the association to the Crown.

The wording of Sub-section 5 Burely leaves no room for doubt that tho whole of tho members of the association are liable for the default of any individual member to meet his obligation in the matter of payment of principal or interest. Any default is met first by the Government, which in turn can claim a refund—not merely from the individual member making default, but as "a debt due by the association to the Crown." The procedure is set out under which the Public Trustee can proceed in case of default of any member of the association. He can take possession of the particular allotment held by tho member in question and realise on it at once or hold it until a suitable opportunity for its disposal arises. ,But the liability for. any loss rests, with the association. We do not imagine that it is likely that any serious losses would be incurred in this way, but there is always the risk. In face of Clause 13 of the Act the Prime Minister's declaration at Winton is difficult to understand. He may probably see the advisableness of making the position quite clcar in an amending Act next session.