DOUBT REMOVED.

Auckland Star, Volume LXV, Issue 4, 5 January 1934, Page 13

DOUBT REMOVED.

OVERSEA , INTEREST.

LOCAL BODIES' RIGHTS.

HOUSE OF LORDS DECISION,

A statement concerning the recent decision of the House of Lords in the Adelaide Electric Supply Company case was made by the Minister of Finance, the Right Hon. J. G. Coates, at Dargavillc, yesterday. The principal effect of the case as far as New Zealand local authorities were concerned, he said, was that it definitely cleared up the uncertainty which previously existed as to the rights of any local authorities to effect payment of interest in London in New Zealand currency. "It is unfortunate," continued Mr. Coates, "that the decision was not given earlier, as a great deal of trouble and misapprehension would have been saved. It seems clear that the effective discharge of monetary obligations must be made in the legal tender of the country where the contract stipulates payments are to be made. "The position, therefore, is that where a local authority has issued securities giving to the lender an option to obtain payment of interest and repayment of principal either in London or New Zealand the holder of such debentures is entitled to obtain in London the nominal rate of interest in legal tender of the United Kingdom; or, if coupons are presented in New Zealand the holder is entitle! to obtain the nominal amount in legal tender of New Zealand. "There is one result that may accrue from this decision, and that is that New Zealand holders of debentures in this class may seek to obtain an unfair advantage by reason of the present exchange rate between London and New Zealand, and may send their debentures to London for the purpose of obtaining payment of interest and, in cases where loans are shortly to mature, for the purpose of obtaining repayment of principal in London.

"I desire in conclusion, however, to take this opportunity of mentioning

that tlie Government has made arrangements with the associated banks of New Zealand whereby capital moneys released from the redemption of debentures will not be transferred from London to New Zealand through the agency of the associated banks. This arrangement follows the agreement made by the banks with the Government when the Banks Indemnity Exchange Act, 1932-33, was passed. Holders of such debentures would therefore be well advised to retain them in New Zealand. Otherwise they may find extreme difficulty in arranging for the transfer of moneys from London to New Zealand."