REPAYMENT OF LOANS.

Auckland Star, Volume LII, Issue 159, 6 July 1921, Page 7

REPAYMENT OF LOANS.

APPORTIONING SINKING FUNDS

A LOCAL BODY QUESTION.

"The position is one that might become highly important in the case of a local body of doubtful solvency, and it is a position that has been entirely overlooked by tho legislature,' , remarked his Honor Sir .John vSalniond at the Supreme Court this morning. The matter before tho court arose on an originating eummone, and concerned tho allocation of certain sinking funds held by the City Sinking Fund Commissioners, tho body incorporated by Act of Parliament" to luok aftor tho funds which go to par off loans raised by the City of Auckland. Awny back in ISOfl the City Council raised £!)0,000 in one sum of £50,000, and lhe balance in the five subsequent years. Xo sinking funds were provided for, but later this defect was remedied by Act of Parliament. The £.iO,OOO is now due, and the commissioners are asking the court to say how the sinking funds, which are not sufficient to pay oil tho whole nor even the iirst part, should be applied.

Mr. K. J. Prendergast, who appeared for tho commissioners, argued that the amount of the sinking fund in hand should be allocated in proportion to the different amounts of the loan as they were raised from time to time.

Hjs Honor pointed out that there were three alternatives, first to apply the sinking fund to paying off the lirst debentures that became due. second to wait until all the various amounts of tho loan were due and then divide the sinking fund between them, which was impracticable; third, the application of the sinking fund in proportion to the amounts raised from time to time.

Mr. J. Stanton, who represented tlm Auckland City Council, contended that the commissioners should apply the whole of the sinking fuud in hand to the repayment of the amount of the loan now due.

Mr. V. K. Meredith, who represented the Attorney-General, submitted that the reasonable construction of the law was that the sinking funds iv hand should be applied to tlie repayment of any part of the loan as it became due. His Honor observed that the only people really interested in the question, the debenture holders, were not represented before the court. Counsel said that there would be some difficulty in citing them as they wore not known, and the bonds were made payable to bearer. His Honor reserved his decision.