GAS CONTRACT

Dominion, Volume 11, Issue 280, 15 August 1918, Page 9

GAS CONTRACT

PETONE AND HUH BOROUGHS

INTERESTING LEGAL POINT

In. tho Supremo :Court yesterday bofore Hia Honour", tho Chiot' Justice (Sir hobertj Stout) an interesting matter bearlmrou contracts iu war time was heard. J.t<e Petori'o.. Borough Council sought a declaratory judgment and for an order determining tho following questions':— (1) Has tho defendant corporation (Lower, Hutt Borough Council) power and authority to alter or vary the terms and conditions of tho agreement dated November 4, 1913, between the plaintiff (Petono Borough-Council) and tho defendant,; if tho defendant, for any reason, thinks it expedient" to do so, and in particular, can the defendant corporation increase the'amounts payable to tho plaintiff un- . dor the said agreement? .(2) In ;tho. oirciimstances set out. in the; statement of facts is, in the opiuion of the Court, the contract contained in tho said agreement of such a nature as to' entitle tho - Court, J under Section 17 of the War Legislation Act, 1917, to review, the contract and oxorciso in respect thorc,to the powers contained in the said section?.;'':. Mr. R.. C. Kirk appeared for tho Petono Borough Council, Mr.-E. P. BunDy' for the Lower Hutt Borough Council, : and Mr.P.S: K. Macassey, d the Crown' Law Office, for the' Attorney-General inthe public interest.

The statement of facts set out the several agreements mado between : the'two boroughs an respect to the sale and p'ur- : chase/of:-:gas. It also set out tho letters ,tuat have' passed between the two bodies with': respect to varying tho agreement und entering into a new one on a higher basis of .cost, owing to tho increased cost of. producing gas. i :.-In opening, Mr. Kirk traced at some length the history of the contract, and referred;.to the iuorcased cost of production,as|..the\ reason for asking tho Hutt Council to' vary tho contract and enter into a new agreement. His Honour: Surely that is a matter for tho corporation to determino and not tho Court.

ilr.-Kirk: I should have thought so, but the defendants shelter Themselves behind the contract and maintain that they can do,nothing, Ho relied upon the 'Municipal Corporations Act as giving the iHutt Borough power to 'vary tho con-, tract. :..,,t./'../ His Honour: You do n'ot'proposo that the:Hutt Borough'Council'should commit "hari-kari"? Mr. Kirk:"The onus of proof is on the other side to show that they Lave not tho power to do what they say they .cannot do. t His Honour: They are in tho position of trustees and should hold to their advantage. : Mr. Bunny: That is the point, Your Honour. Mr. Kirk referred to Section 17 of tho War Legislation' Act,, which he read. His HonourV This is' not a work for the supply of materials for work or building. ' % Mr. Kirk contended that it was, and pointed out that the .retone Borough supplied the reticulation as well as the o<* s -, '. ■ His Honour: But that is not supplying material for a building or vork. Mr. Bunny said there was a caso on tho point, which he read. Mr. Kirk pointed out that the Potono Borough was selling gas wholesale to another borough'for distribution. His Honour: It is not a work as stated 1 in Section 17 of tho War Legislation Act. . Mr. Kirk: Then it is not necessary for . me to place the other points before Your Honour. I contend that tho matter .is. , arguable, under the circumstances. When the contract wa6 made the risk of aEuropean war was not contemplated by i eitfier side.

'His Honour: Then you consider that because.war.has oomo a contract should be subject to variation?

- Mr. Kirk: I do not; but this was a diherent kind of agreement. '•' His Honour: In what' respect? Mr. Kirk: When the contract was made it was not contemplated, that the conditions would be affected by'war, that shipping would have been commandeered, and enormous difficulty experiouced in coal.

.His Honour: Why cannot you make contracts with the.coal owners so as to get your, coal? -Why should tho Hutt Borough relievo you? • Mr. Kirk: Why should they be tho only pcoplo to benefit? His Honour: Because they were wise enough to enter into a long contract. ': Mr. Kirk contended that the contract implied a continuance of peace oondi-; tious as its basis,- and held that the othor side could enter into a compromise. • Tor the Hutt Borough Council Mr. Mr. Bunny submitted that Clause 12 of the agreement, was of some importance. It provided for the termination of the oontract and showed that the parties, had apparently given consideration to the possibility of the contract being terminated. He then quoted' several recent decisions given in England, and said the question arose, since the Petene Council, had no legal right to ask for a modification of the contract so as ; to get tho .defendant council to share the losses, could it compel the defendant to do s6? He ''thought not. A council, ho maintained, was like a trustee or an agent for the ratepayers. His Honour: That is so.

Mr. Bunny thought a council's duties .were as high as those of a trustee or a board of directors. The point he wished to make was that they should not be placed/in tho position of-entering into some arrangement which would merely make the Lower Hutt Borough share the losses of.-'the Petone Borough.' He held, there w&s no discharge of tho contract because of the war.and- the Hutt Bnr,ongh Council had no power to ehare the; l«=s<vj innirr°d hy the Petone 'Borough 'Council through the waT,, ■'•• ■ Mr. Macassey.- for tlie. : Crown.- briefly: areruediagainst'the variation 1 of the contract'or a. compromise or'concession.; HisHonoU" reserved his decision.