NEEDLESS ALARM

Dominion, Volume 28, Issue 91, 11 January 1935, Page 10

NEEDLESS ALARM

Obsolete Banknotes Will Still Be Accepted

NO LONGER “LEGAL TENDER”

The publication of a telegram attributing to the general manager of the Bank of New Zealand the statement that after January 10 the notes formerly issued by the trading banks of the Dominion would cease to be legal tender caused a shock in business circles in Auckland, according to the “Star.”

“The message is misleading, to say the least,” was the comment of Dr. E. B. Neale, secretary of the Auckland Chamber of Commerce. “The position is that bank notes of the six trading banks will be legal tender after to-mor-row only when presented by the holder to the issuing bank up till August 1, 1936, and thereafter up till August 1, 1974, when presented to the office of the Reserve Bank. After then presumably they will be Valueless, as a clause of the Reserve Bank of New Zealand Act states, inter alia: ‘Any bank'note shall on the expiration of that period be deemed not to be in circulation, and an amount equal to the value thereof , shall thereupon be paid by the Reserve Bank into the Public Account to the credit of the Consolidated Fund as if such amount were unclaimed moneys within the meaning of the Unclaimed Moneys Act. 1908, and shall be dealt with as provided by that Act.’ No Fear of Rejection. “The holder of bank notes need, however, have no fears that the tender of trading bank notes will not be accepted by shopkeepers or creditors, as they can always present them to the issuing banks for the next 18 months and to the Reserve Bank after then.” Referring to the proclamation gazetted last November declaring that British silver coins would not be legal tender after February 1 next, Dr. Neale said the announcement was not likely to cause any inconvenience as banks were not likely to refuse to accept such coins.

Legal tender is the discharge of a debt in a manner recognised by law as being of such kind that a creditor to whom it is offered cannot refuse to accept it in payment of an obligation to him.

Clause 5 of the Coinage Act of 1933 states: “Subject to the provisions of this section, a tender of payment, of money, if made in British coins or New Zealand coins of current weight shall be a legal tender—(a) In the case of gold coins, for the payment of any amount; (b) in the case of silver coins, for the payment of an amount not exceeding forty shillings; (c) in the case of bronze or cupro-nickel coins, for the payment of nn amount not exceeding one shilling.”

War-time Amendments of Law.

Prior to the establishment of the Reserve Bank the Banking Act, 1908, dealt with the issue of notes generally. The Governor-General could empower any bank to issue and circulate notes, subject to the provisions and restrictions contained in the charter under which such bank was incorporated. AT such notes to be payable in gold only at the office of the bank at the place of issue, and to be a first charge oil all assets of the bank. Under the Bank Note Issue Act, 1593 (amended in 189! and 1895), certain bank notes were, for a short period, made legal tender in New Zealand.

On August 5, 1914, immediately after the outbreak of the Great War, a.i amendment to the Banking Act was passed empowering the GovernorGeneral in Council to make a proclamation declaring “That the notes payable on demand by any bank therein named, and then issued or thereafter to be issued or reissued within New Zealand under any lawful authority during the period limited by the proclamation, be everywhere within New Zealand a good and legal tender of money to the amount therein expressed to be payable.”

Conditions governing the issue of such proclamation were laid down, and the bank' might bo required to give adequate security that it would redeem the notes in gold on the expiration of the period covered by the proclamation Provision was also made for payment by the- State Treasury in the case of default by the bank. During the period anv such proclamation was in force coined gold could not be exported except with the consent of the Minister of Finance. During the period between August 5. 1914, and November 5. 1919. the prohibition also applied to uncoined gold. Immediately on the passing of the amendment referred to. a proclamation was gazetted declaring notes of till six banks of issue doing business in New .Zealand to be legal tender to SoptomYer 6, 1914. Further extensions were made from time to time. Under _ rite Finance Act (No. 3). 1934. this legislation was repealed, the repeal to take effect from January 10. 1935.