RAISING LOANS.

Hauraki Plains Gazette, Volume XXXVIII, Issue 5182, 23 September 1927, Page 4

RAISING LOANS.

UNITED DRAINAGE BOARD’S CASE.

LEGAL POINTS ARGUED IN COUR'i'

On March 11. .an Order-in-Council proclaimed the Hauraki Drainage District and the Horahia Drainage: District to be one under a united board as from April 1. The question of the loans authorised by tjiese boards prior to their merging was argued before Mr Justice Macgregor in the Supreme Court at Wellington on Monday, the Bank of New Zealand, to which loan debentures' had been hypothecated, having insisted on a ruling of the Court, In January, 1926, a poll of ratepayers authorised the raising of a loan of £15,500 for drainage works in the Horahia district. The Horahia board hypothecated to the Bank of Nojw Zealand £lO,OOO of the clepentures created, and of these £6ooo' were said, leaving £4OOO hypothecated to the bank. The bank refused to lend any more money to the Hauraki United Drainage Board until the questions: raised had been settled by the Supreme Court. CONTRACTS LET. When the Hauraki United Drainage Board was constituted, it was stated, the drainage works were being constructed under contract, and since its constitution the United Board had confirmed and acknowledged these contracts and let further contracts: in respect of the loan. Also, under a special order, the Hauraki Drainage Board had authorised the raising of a loan of £lOOO for the purpose of performing certain drainage works, and on March 6 had pledged a special rate as security for this. In June the superintendent of State Advances: informed the board that there was no power to raise this loan. POSITION OF LOANS. The action was brought by the United Board to determine whether > the word “property” in section 15 (2) of “The, Land Drainage Act, 1908,” included the powers vested in the 'Horahia Drainage Board in respect of the authority of the loan of £15,500, so as to pas& these powers to the Hauraki United Drainage Board under the provisions of the Act. Also it was asked whether the Hauraki United Board had power to sell t ( he £4OOO debentures created and hypothecated by the Horahia Board, subject to the rights of the bank, and whether £5500 balance of a loan (of’which. £6OOO had been raised and spent by the Horahia Board) might now be raised without again going to the ratepayers on the question. If not, did the balance of £5500 lapse, or what was the position? Also it was asked whether thej special rate struck as security for the loan was in force and leviable by the Hauraki United Board as regarded the whole loan of £15,500', or £lO,OOO of the sum (this being the £6OOO raised by the Horahia Board and the £4OOO hypothecated to the bank), or £7832 9s 3d, which represented the £6OOO plus- the £1832 9s 3d, which the Horahia Board owed the Hauraki United Board on March 31glast. It was asked further whether the plaintiff board might raise a loan of £loo'o in respect, of which all precedent steps had been taken by the Hauraki Drainage Board. LEGISLATION POSSIBLE. Mr’ E. M. Sladden who appeared for the board, stated that, the mat-, ter was one of considerable importance to local bodies. Special legislation had been promised for this session, if it was needed. Meantime the Court’s ruling was desired. Mr Justice Macgregor: It seems to me more a case for the Full Court. It is possible that neither party will be satisfied with the; decision of one judge. Mr Sladden : On 'the one hand, the new board is liabl/a for the- commitments of the boarrl: we can’t escape from that. On tho other, if the position is as contended by my friends, we have no assets. His Honour: You have the property, I suppose. Mr Sladden : I’or which we haven’t paid I I submit sir, that we are; entitled to hypothecate these debentures again, if wo pay off the bank, and that we are entitled to sell them. If all the; rights and properties pass to the board,' it follows that they can proceed to raiste the other £4500, and hypothecate the debentures. NO OBLIGATION. The word “engagement” must be, construed to mean .an obligation, aaid Mr D. R. Hoggard, for the Bank of New Zealand. There Xvas no obligation on the. part of a local body to borrow money which it had been authorised to borrow. The section, he confessed, was one of the most obscure that he had <jyer endeavoured to construe, and it seeme.d almost futile to attempt to do so. One of the most remarkable things about it was the proviso in section 15, which read!,. “Provided that on any such union it shall be lawful for the boards of tite districts so united to agree, as, a Jtowdition . precedent to such union., /that all special rates made as secuiitJr f° r loans then existing shall contuwe t° I be levied, and every such agreement sihall be binding on the board! of the united district.” He wished to point ort that the boards might agree wr something precedent to agreement, and yet under the provisions of sections 1 at id 4 there might be union', without agreement on the recommendation af a commission. One would suppose that previous loans would be a charge on the district 'which authorised the m, but, in purs,nance of the agreement previous Icmns could be charged .oil the whole of the district. NO POWER. Supposing that there were, two local bodies-, one w'hich had gone ahjead and wasted a lot of money, the other a lightly rated area, union might not be wanted by th e solvent body, but, following a commission, an iCirder-in-Council for union might be; issued. And the core mission had no irower in the. apportioj ling of liabilities. His Honor ir : I think that the proviso is quite a reasonable one! Mr Hogga rd : The more reasonable way would be for special rates to be charged oni th.e district which raised them. His Honqi .ir : Does this Jhrow much

light on the question that we are discussing, Mr Hoggard ? Mr Hoggard: It only shows the whole position, sir. There is a remarkable lack of legislation on th® whole point. His Honour : That is a remarkable contention in New Zealand. I have always heard that there was top much legislation. Mr Hoggard: Not on the points where one needs help, sir. ROOT OF MATTER. Mr E. Currie, who represented the Attorney-General, submitted that the root of the whole argument rested in the section of the Local Bodies Finance Act, 1922, which stipulated the methods by which a local body' might .obtain authority to borrow. When two companies merged, their powers wore not those; which appeared in the articles of association of the merged companies, but those which appeared in the articles of association of the new company. When a local body was authorised to borrow money, but had not done, so, there was no obligation. An unexpended authority equid be cancelled by the Government.

His Honour reserved his decision.