LEGAL POINT.

Auckland Star, Volume LXIII, Issue 27, 2 February 1932, Page 7

LEGAL POINT.

WHOSE LIABILITY? Must Commonwealth Shoulder Bad Debts ? OPINION IN ENGLAND. (United P.A.—Electric Telegraph—Copyright) (Received 12.30 p.m.) LONDON, February 1. The Stock Exchange opened with New South Wales stocks about five points down and Commonwealth two, but no great significance is at present attached to this. The Commonwealth's action in refusing to pay the State's interest meets with some approval in London, but generally speaking there is a feeling of obscurity regarding the Federal attitude because of the belief hitherto held that the Commonwealth is fully responsible for State debts. The New South Wales Agent-General, in London, Mr. A. C. Willis, declines to comment, except to express tho belief that tlio interest will, ultimately be paid. The "Financial Times' " market correspondent says Australian stocks have been depressed by Mr. Lang, but the view is heard that his action may be a blessing jn disguise. "Mr. Lang has outdistanced himself on this occasion," says the paper. "He is doing Australia a deliberate disservice, and the sooner he retires the better." While tho Dominions Office of the British Government is keeping the closest watch on the Australian financial situation and with the implied constitution questions, the Australian Press Association learns that the Governor, Sir Philip Game, has not communicated with Whitehall. It is felt here that the question must momentarily be left between Mr. Lang and the Loan Council. If Sir Philip Game intervenes, it will be only in the event of the Commonwealth and other States failing to bring New South Wales into line. If Extreme Measures Are Needed. However, should only extreme measures suffice, there ie no doubt that any action Sir Philip takes would be fully supported by Whitehall. "The Times" says the Commonwealth's decision not to provide the £500,000 required by New South Wales to meet interest due in London and New York to-day need not alarm holders of New South Wales stocks. The difficulty at the moment is to decide how best to protect both the' interests of the creditors of New South Wales and the credit of Australia, says the paper. "There will be no default though there may be a temporary suspension of payments. The result of the decision must be to bring to a head the struggle between Mr. Lang and the rest of Australia. The outcome can be awaited with confidence." The "Financial News" says it was generally and justifiably assumed that the liability of New South Wales would temporarily be shouldered as it was last year and the Commonwealth cannot escape legal liability under the Validation Act. While the Commonwealth has taught Mr. Lang a useful lesson it has chosen an ill-advised and dangerous method.