MORTGAGES BILL

Dominion, Volume 12, Issue 305, 20 September 1919, Page 3

MORTGAGES BILL

THE MEASURE EXPLAINED A CONSOLIDATION ACT The second reading of the Mortgages Extension Bill was moved by the Hon. Sir Francis Bell in the Legislative Council yesterday afternoon. The Leader of the Council explained the Bill at considerable lenirth. In the course of the explanation he said:—With respect to priui cipal moneys secured by mortgage, and contracts for the purchase of land, and purchnsimt clauses contained in leases, the creditor bus a power beyond the right of claiming payment from his debtor—a power, namely, in case of default, to destroy tho property of the debtor: in the case of a mortgage by sollinsr the mortgaged property; in tho case of a contract for sale of land by rescinding the contract, and in tho case of a lease with a purchasing clause by rofusintr to allow the lesseo the benefit of the DUrchaains right after tho lapse of the time fixed by the contract for the exercise of the right, It was to limit tliat power of the creditor that the Mortgages Extension.'Act was passed on August U, Act which was modified bv variouiCamendnients is in force to-day. l ~ of' Protection. It never was*.' tho intention of Parliament as exnrescd in the Act, or of the Government whfeh proposed the Act, t interfere with 'Ontracts of the parties, whether expressed in mortgages, contracts of sale, 0, purchasing clauses, beyond granting •'■* protection to debtors in cases where tt-iMebtors wero unnblo to find the mone.-pito pay their creditors 'lit- the times appointed by the contracts. It was the .intention, and it is the effect, of the Act to limit tho protection to cases where the circumstances of war prevented the debtor from finding tho money to release his property from the power' of the creditor. It followed that there must be a tribunal to decide in each case (whero the parties could not agree) whether it was, or was not, fair and reasonable that further time should be given to the debtor, and the tribunal selected was the one in which we all have confidence—tho Supreme Court. What it seems to me necessary to emphasise as forcibly as possible .is that the date fixed bv the contract of mortgage never has been an element in the determination of the auestion (the sole question) whether or not' under the circumstances it Was fair to continue protection to the debtor against tho power of the creditor to destroy his property. Whether a mortgage Ml duo in 1915, or in 1918, the same auestion arose for decision. In either easo if the mortgagor could find the money, the Act contemplated that he ought to find the money, and that the Court would require him to find the money; and in either case if the mortgagor could not find tho money, the Act intended that further time should bo riven to him, and tho Court would grant extended protection.

Effect of War Loans. The war having ended we find that the circumstances existing now by reason of the past war render it even more difficult than in the earlier years of the war for debtors under mortgage, contract of purchase, and purchasing clause, to find the money necessary to pay oil their creditors and preserve their properties against the creditor's power. We all know that the raisin/; of war loans in the Dominion has so greatly reduced the moneys generally available for investment in loans on the security of land that it is almost impossible for a mortgagor to borrow moneys required to pay off his existing l mortgagees. And therefore, even more to-day than in 1914 it is desirable to protect the property of the men who cannot pay. But it is just as necessary to avoid protecing the man who can pay, and therefore it is still necessary to have an impartial tribunal to -decide the question (still the sole question) whether in each case fairness and justice do, by reason of tho existing circumstances, entitle the debtor to further extension of the protection. But again- that question has no relation to the date fixed by the contract •of mortgage, or by any renewal thereof, and by no possibility can such date be made relevant to the decision of the sole question. I have no doubt that those who follow, and accept, my reasoning up to this point will admit that the only possible remedy is to extend the oneration of the existing law until some future date at which it may be reasonably anticipated that the circumstances created by the war, and still existent, will have so far changed as to render it unnecessary that the power of the Court to restrain the exercise of the contractual'powers should continue in existence. The date which has been proposed is December 31, 1920, but the Government does not insist upon that date if it should seem to Parliament that that particular date is too near or too remote. • The 'Sliding Scale Method. The contrary proposal is what is called the sliding 6cale method, "by which the protection of mortgagors 6hotild terminate automatically at specific periods fixed by relation to the dates fixed for repayment by the contracts of mortgage. The adoption of that method would defeat the whole object and purpose of the Act. In many cases tho mortgages . which would first become recoverable under a' sliding scale arc mortgages which in equity should be extended for a further period, and in many other cases tin mortgages which would be automatically extended for a long period are mortgages, tho extension of which would be most unjust to the mortgagee. I am now. speaking not merely from my experience as a lnwyer—though even in that Tespect I think I may claim to know a 6 much as my critics—but also from the large number of !ctter9 and representations on that subject which have naturally been sent to me. A considerable number of such representations are from small mortgagees who complain that their mortgagors are using in business tho money which they have borrowed, and thereby making a large profit over and above the interest which they pay to the mortgagee, who is therefore unable himself to find capital for any venture. The purpose of tho Act was not to extend the period of mortgages, but (o prevent the calling up of money, in cases'whero bucli calling up would inflict undue hardship on the mortgagor. The question whother the calling up on a certain dato will inflict hardship in a specific case cannot be determined by ascertaining tho data when by the contract the money first became repayable. Yet it is that test. and no other test, which is provided bv a sliding scale based upon the dates fixed by the original contracts.

A Contract, What is it that the Mortgages Extension Act provides? It is that before I the mortgageo can call up the principal I sum due to him, or exercise his powers j of sale, he shall first show to the Sui premo Court that it is fair under the I circumstances that he should be allowed Ito do so. That gives tho mortgageo as i well as the mortgagor a complete opportunity of having the question of fair rates determined by an impartial tribunal, The Court, if it grants leave to tho ' mortgageo to call up tho principal, may j grant it upon conditions in favour of the mortgagor. And if the Court refuses to j grant leave, it may inoreaso the rate ; of interest which tho mortgagor has to pay to the mortgageo. ... It is sup- : posed that tho process open to the morti gagoo is expensive. That is not tho caso. ' It is specially provided by clause 6 that applications are to be made to the Supreme Court by motion, and may bo dis--1 posed of by a Judge in chnmbcrs. Such procedure is comparatively inexpensive It has been suggested that Stipendiary Magistrates should have jurisdiction to deal with the matter; but that, in my opinion, is undesirable. There is uniformity in the decisions of the Supreme Court, and that uniformity cannot lie obtained in the derisions of Stipendiary Magistrates scattered all over New Zealand, The New Provision.

Tho present Act is a consolidating Act repealing the original Act and its amendmonts, and containing no now provision except that found in tho first lines of clause -1, fixing December 31, 1020. as the date whop the protection provided by tho Act expires in all cases. Those who object to the fixing of a specific date for tba expiry of protection oppea*

I to assume Uiat on that date practically all the principal sums secured by mortgages in Now Zealand would become repayable. That assumption is erroneous. Wo havo to consider what has taken placo during tho five years that hnvo elapsed since 1914. Dunns; that period practically every mortgago has becoino due, and in tho vast majority of cases agreement* havo hceu niado hetween tho mortgagors ontl the mortgagees for renewal for lixed periods—the renewals severally beginning on the respective dates when tho several mortgages originally became repayable. In a number of cases of such renewals the period for repayment expires at a cluto beyond December, 1920. A Suggested Alteration, The Hon. 0. Samuel suggested one alteration in tho Bill. Tho suggestion was that whero tho mortgagor ■ consented to ealo by the mortgagee, tho power of sale might be exercised without leav» nf the Court. He observed that n provision of the kind existed in the law of-the country lit the present. He cordially approved of the Bill, as he thought it necessary for the protection of those who most needed protection. Sir Francis Bell indicated, that Mr, Samuel's suggestion met with his approval. Tho Hon. H. L. Michel said that ho would certainly support the Bill. Tho Bill was read a second time and referred to tho Statutes Revision Commiltee.