PUKEKOHE BOROUGH FINANCE.

Pukekohe & Waiuku Times, Volume 5, Issue 187, 30 June 1916, Page 4

PUKEKOHE BOROUGH FINANCE.

Extent of Overdraft

A Test Action

At the instance of the Pukekobe Borough Council an originating summons against the Bank of New Zealand and Attorney-General came before Mr Justice Hosking in the Wellington Supreme Court on Wednesday in order that the extent to which the Council could have an overdraft at the Bank might be determined. The circumstances are that in the ordinary course of things a local authority is permitted to have at the close of the financial 3 ear, viz., on March 3lst, an overdraft to the amount of its income for the year but in view of the uncertain reading of a clause in the Municipal Corpotations Act relative to overdraft having once been paid off by a loan, as was doue in the case of Pukekohe some three years since, the position has been that the Bank has limited the Council's overdraft to the amount of the rates as outstanding on Msrch 31st. Mr T. F. Martin appeared for plaintiff borough, and Sir John Findlay, K.C., and with him Mr J. L. Stout, for the Bank of New Zealand. Mr P. S. Macassey appeared for the Crown. Mr Martin applied for a declaratory order to say whether the borough could legally borrow money from the bank, and the bank could legally allow plaintiff council to borrow to the full extent permitted by the Municipal Corporations Act. The Court was also asked to say if ratepayers had power to authorise and raise a loan to pay off the overdraft of the corporation, and, if not, had the amount of overdraft paid off out of the loan to be treated as still owin& for the purpose of estimating the amount the corporation is now entitled to borrow on overdraft; and whether the limit imposed by the Act may be lawfully exceeded, provided that the overdraft upon March 31 does not exceed that limit. Mr Martin pointed out that the limit of overdraft as fixed by the section referred to was the amount of the income of the previous year. The Council had paid off its overdraft, £485, out of a fresh loan, amounting to £B3OO, and having expended the loan money, it was desirous of overdrawing its account for the curreLt year up to an amount not exceeding the limit imposed by the Act. But doubts had been expressed by the bank, with which the

borough still had its account, as to the right of the Council to so uve; - draw its account.

Mr Macassey said the Crown was ] interested in so as far it desired to maintain the statue which circum-, scribed the poweri of borough councils in the interests of ratepayers

Sir John Findl<y said that the bank was only desirous of safeguarding its own interestc, and if the bank made advances in anticipation of loans beiDg raised, and the ratepayers did not legally concur, the bank would have trouble in getting its money back. The Judge considered that in such a case the risk of the bank would be due to the softness of the bank's manager. Sir John Findlay sail the point, as far as the bank was concerned, was whether the overdraft, having been once paid off out of loan moneys illegally raised, might still be regarded as a liability against the Borough Council The Judge reserved decision.