SUPREME COURT

Dominion, Volume 7, Issue 1935, 18 December 1913, Page 3

SUPREME COURT

THE INTEREST CHARGES t)N LOAN INSTALMENTS. TO LOCAL BODIES. before the new act and after. CAN RATE BE RAISED? 'Whether tho Now Zealand Stato Guaranteed Advances Amendment Act, 1912, is rotrospectivo in its operation as regards tho rato of interest payablo 011 loans to local bodies was a question submitted to His Honour the Chief Justice (Sir Robert Stout) in the Supremo Court yesterday morning. Tho matter before tho Court was a test ease, to ascertain tho position of local bodies, who woro actually receiving loans from tho Stato Advances Department 011 the instalment system when tho amending Act camo into force. The plaintiff in the case is tho Borough Council of Whangarei (incorporated under the Municipal Corporations Act, 1008), and tho defendant is the Superintendent of tho New Zealand State Guaranteed Advances Office. Mr. C. P. Skorrett, K.C., with Mr. G. H. Fell, appoared for the-plaintiff corporation, while the Solicitor-General (Mr. J. W. Salmond, K.C.) appeared for the Superintendent. Before the Act—Two Instalments at Per Cent. In a special case stated for tho Court it was sot out that 011 Ferbruary 15, 1911, tho Stato Advances Department approved a loan of £19,200 to be paid to cho Whangarei Borough Council 011 tho Bstalinont system. Tho money was required for tho formation and construction of streets and surface drainage. The currency was to ho 36A years, and tho interest 3}„ per cent, per annum, whilo security was to be found by striking a special rate of live-sixths of a penny iu the £ over the whole of the borough. 1 Instalments of the loan we're Vo bo advanced by, the- Department to Iho borough as follows:—£4000 immediately ; £4000 on April 1, 1912: £4000 on April I, 1913; £4000 on April 1, 1914'; and £3200 on April 1, 1915, Two instalments were paid, the rato of interest on these being 3-J- per cent. After tho Act—Department's Proposal. On February 27, 1913, the plaintiff corporation applied for tho third instalment of the loan to bo paid on duo dato, April 1, 1913. Tho Superintcnd- _ cut replied by letter 011 March 20, 1913, as follows:— / Town Clork, Whangarei. Sir,—Re £19,000 loan ... I havo to call your attention to tho New Zealand State Guaranteed Advances Amendment Act, 1912. You will see from Sub-section 1 of Section 2 that tho rato of interest charged to local bodies is oneeighth per centum moro than the cost to tho Department. You will please noto. that, by Sub-section 3, of Section 2, tho provision applies ■ to all loans, or to any part of a loan, to bo paid to a local author--1 lty after the passing of tho Amendment Act, whether the application ifor tho loan was finally granted be- • foro or after tho passing of the Act. As tho special rate struck provides . sufficient security for the loan at the increased rate, it is not considered necessary to.pass a resolution under Section 3 of -tho above-men-tioned Act. As the Department is unahlo to raiso tho monev at the rato anticipated, when tlio'loan was granted, it will bo necessary to charge your council a higher rate than formerly. For the pavment of the third instalment of £4000, ' tho present rate of interest is 4£ per cent., and the lialf-yearlv instalment (including, sinking 'fund) wdl amount to £2 13s. 3d. for every one hundred pounds of the loan. J'resh debenturo forms at the increased rato are now being printed, and will bo forwarded for execution as soon as cossible.—(Signed G. F. C. Campbell, Superintendent.) Borough's Contention, It was contondod by the plaintiff corJ oration: (1) That tho defendant Su--lerintendent, with tho approval and *he consent of tho Minister" of 1 finance, had power to enter into tho for tho grant of tho loan of to the corporation upon tho instalments as specified; arid (2) thai Section 2 of the Now Zealand Stato Guaranteed Advances Amendment Act, 1912 does not authorise tho defendant Superintendent to increase tho rate of interest payablo 111 respect of tho third and subsequent instalments of tho loan which shouid be advanced at tho rato of interest (3 J per cent, per annum) agreed upon when .the loan was granted. Department's View. On behalf of tho defendant Superinfcendent it was contended: (1) that under tho New Zealand Stato Guaranteed Advances Act, 1909, tho Superintendent had no power to make any contract lor tho grant in futuro of a loan or any instalment of a loan; (2) that if ho (the Superintendent) ■ had any such power Section 70 of tho Act required that tho loan should be at tho rato of interest payablo 011 tho moneys, out of which tho. loan or instalment of tho loan was actually paid, and that a cout tract to grant a loan or instalment in futuro at a fixed rato (determined bv ho contract itself) was ultra vires anil 1, n 3 ) 1 ! 10 Superintendent) liad any such power, tho right of 11 local authority, to suo him for a breach of any such contract, was taken away by Section 3 0 tho Now Zealand State tniaranteed Advances Amendment Act, ' ant ] t ' lat the Superintendent ijas precluded by . Section 2 of tho Amendment Act from lending any further money to tho plaintiff corporation oxcept at a rato of interest in conformity, with that section. It was stated during the course of argument that the Borough Council did not desiro to recover anv damages' H,« W mol T? l> +, !ioc^ in 3 » declaration of If . !l ° kupwintcndont was V'.thin his right m the present instance, then it was said- that the next instalment of tho loan would bo at 4J. per cent, interest. J Argument occupied tho Court until nearly 4 p.m., when His Honour reServed decision.