SUPREME COURT

Dominion, Volume 9, Issue 2809, 29 June 1916, Page 9

SUPREME COURT

BORROWING POWERS OF BOROUGHS

AN. INTERESTING POSITION

' The'torrowirig power's Of municipal corporations was discussed before Mr.Ji.stice llosking in the Supreme Court yesterday, when an'originating summons brought under review the position of the Fukekohe Borough Corporation and tho Bank of New Zealand.'

Mr. T. F. Martin appeared for the plaintiff borough, and Sir Johii'Findlay, K.C., and with liirn Mr. J. L. Stout, for the Bank of New Zealand. Mr. I'. S. Macassey appeared for the Crown. Mr.'Martin applied for a declaratory order of the Court to Say whether tho borough corporation could legally borrow money from the bank, and the bank could legally allow plaintiff to borrow to tho full extent permitted by Section 90 of the Municipal Corporations Act, '.908. Tho Court was also asked to si'.y if the ratepayers had power to authorise and raise a.loan to pay.off the overdraft (of ths corporation; and if not, had the amount of the overdraft paid fit out of the loan to be treated as still owing for tho purpose of estimating the Htiount the corporation is now entitled to tor row on overdraft; whether the limit imposed by Section 9G may be lawfully exceeded provided that the overdraft upon March 31 does not exceed that limit. Mr. Martin pointed out that , the limit cf tho overdraft as fixed by tlie section referred to was tho amount of tho ijiconte of tho previous year. Tho corporation had paid off' its overdraft, .£485; out of a fresh loan, "mounting to .CSHOO; and having expended tho loan money the Pukekohe' Council, was desirous of over-drawing its .-iccount for tho current' year- up to an amount not I'xcecding th'e limit imposed by Section 36 of the Municipal Corporations Act, 1908, but doubts had been expressed by the bank, with which tho borough still had its account, as to the right ef the I'ukckohe Council to so overdraw its. aennunt, and the Court was asked to decide •

Mr. Macassey said the Crown ,wjs interested, in so far as it desired tu maintain tlie statute which cii'ciiinsci'ibed the powers of borough councils in the interests of ratepayers. If it were permitted that councillors should -borrow money without limit' unknown to the ntepay. ers and without their sanction', Ihen a dangerous precedent misht be established. Sir John Findlay said tho bank was only desirous of safeguarding its cwn interests. and if the bank made advances in anticipation of loans being raised and ratepayers did not legally concur the bank would have trouble with individual councillors and difficulty in getting its money back. '• ■ . . His Honour considered that in such a case the risk of tho bank would be due to the "softness" of the bank's manager.

Sir John Findlay said the point as tar' as the bank was concerned was whether the overdraft, having been once raid off out of loan moneys illegally raised, might, still bo regarded as a liability against tho Pukekolie Borough Council, and therefore added to the liabilities which, . under the limiting section of the Act referred to, are not to exceed as overdraft at the end of March next the income of the council for the current year, or any subsequent year. His Honour, having stated that the case nresented some interesting and delicate features, said he. would take time to consider his decision.