New Legislation

Dominion, Volume 30, Issue 41, 12 November 1936, Page 15

New Legislation

MORTGAGE DEBTS : Provision For Relief From Liabilities FARMS AND HOMES Adjustment Procedure Explained The eventual effect of the Mortgagors and Lessees liehabilitation Act will be to lift as from January 31 next the moratorium which has operated in New Zealand for the past five years unless relief from mortgage debts is applied for and granted in terms of the legislation. If an application for adjustment is granted the protection continues until the final decision of the Court of Review and then ceases. Briefly, the Act provides for the adjustment of mortgages and leases executed before October 1, 1936—rural mortgages on the basis of the productive value of the farm, and urban mortgages to the present-day value of the security. The amount by which a mortgage is reduced is treated as an unsecured or adjustable debt. Applications for relief must be made not later than January 31, 1937.

The general purpose of the Act so far as farmer applicants are concerned is to retain them in the use aud occupation of their farms as efficient producers, and to make such adjustments as will ensure that the liabilities secured on any property do not exceed the value of that property, and that the rent of any leasehold property does not exceed its rental value. It aims to adjust the total amount and terms of payment of all their liabilities, whether secured or unsecured, so that after allowing for all normal current expenditure and sufficient for the maintenance of themselves and their families in a reasonable standard of comfort they can reasonably be expected to meet their liabilities as they ' become due, either out of their own moneys or by borrowing on reasonable terms. Home Applicants. So far as home applicants are concerned, the general purpose of the legislation is to retain them in the occupation of their homes, and to make such adjustments of their liabilities as will ensure that those secured on any property do not exceed the value of the propertv, and that the rent of any leasehold property does not exceed the rental value. It aims to adjust the liabilities that are secured by adjustable securities or are adjustable debts so that the applicants concerned can reasonably be expected to meet them as they become due, either out of their own moneys or by borrowing on reasonable terms. The general purpose in respect to applicants other than farmer or home applicants is similar—to enable them to retain possession of their mortgaged or leasehold property and to make adjustments in their liabilities so that they can reasonably be expected to meet them as they full due. The Act, which binds the Crown, applies to the following classes of mortgages: Mortgages that were executed before October 1, 1988; mortgages that were in fact operative or designed to take effect before October .1, 1938, though not operative before that dale; mortgages to which the Act has at any time applied but which has been varied by the parties thereto; and mortgages that have been executed in replacement or substantial replacement of mortgages to which the Act has at any time Governor-General can by Order-in-Council exempt from the operation ot the legislation any specified mortgages or any specified class of mortgages. Agreements to Purchase Land. Agreements for the purchase and sale of land are deemed to be mortgages and the vendor is in the same category a»- 1 mortgagee and the purchaser has tae same rights as a mortgagor. The legislation applies to all leases that were executed before October 1, 1936, and to all leases that have been entered into in renewal of such leases, ine right to relief is not affected by reason of the fact that a lease has expired or been determined before or after October 1. Provision is made for issue of Orders-in-Council exempting specified leases. The legislation can be extended by Order-in-Council to apply to any licence or other instrument for the payment of royalties in connection with the cutting and removal of timber or the extraction of coal or fire-clay. Court of Review. A court of record, to be called the Court of Review, is established. Jm« court is declared to be the same court as the Court of Review of Mortgagors’ Liabilities established under the Rural Mortgagors Final Adjustment Act, J J 3435. The court consists of three members, one of whom is to be a person eligible for appointment as a judge of the Supreme Court bench. A judge of the Supreme Court can be appointed judge of the Court of Review, and in that case the judge so appointed will hold both offices concurrently. However, the person who at the lime the legislation was passed held the office of judge of the Court of Review under the Mortgagors Final Adjustment Act is automatically appointed without the necessity for further appointment. (This is his Honour Mr. Justice Johnston.) The other members of the Court of Review vacate their offices, but they are eligible for reappointment. The court will sit as a judicial bcwly for the determination of appeals from decisions of adjustment commissions aud other matters formally submitted to it. It can issue general directions to be observed by adjustment commissions in the exercise of their powers, and can itself at auy time exercise auy power or function of an adjustment commission. The court, the siltings of which will not be open to the public, can repeive as evidence any statement, document, information or other matter that may assist it to deal effectually with the case before it, even though such evidence might not be admissible in a court of law.

The decision of a majority, one of whom is to be the judge, will constitute a decision of the court, and if file members present are unable to agree, the <lecision of the judge will be tlie deeinion of the court. Proceedings before the court are not to be held bad for want o£ form. There is no appeal from an order of the court, and no proceedings or orders can be challenged, reviewed, quashed or called in question in any other court. The Governor-General can by Order-iu-Coun-cil appoint two additional Courts of Review, and a person can bo appointed to hold office as judge notwithstanding the fact that he has reached the age of retirement prescribed for judges. Adjustment Commissions. Adjustment Commissions can be appointed by the Governor-General in Council. Every commission will be given n distinctive name, which can be changed at any time. Commissions, which will consist of not more than three members, will hold office during the pleasure of the Governor-General in Council. Where a commission consists of more than one person one of the members will be appointed chairman. Any person can lie appointed to hold office concurrently as a member of two commissions. All adjustment commissions established under the Mortgagors and Tenants’ Belief Act.

1933, aw abolished, but the members are cli-iblo foi- reappointiueut. The sittings of commissions will not be open to the public. . . All orders of adjustment commissioas are to be tiled with the Court ot Review. Within 28 days after the tiling ot iu order of a commission, or within such further time as allowed by the court, any person affected by the order can appeid to the court from the order. Il- no appeal is lodged the court, before the order is sealed. can review the order or reler it back to the commission fur further consideration. Upon appeal or review the court can confirm, discharge, or vary the order or refer it back to a coiuuiissioii tor lurlber conskleratiou, and generally make any such order as it deems just and e<iuitable in the circumstances of the case. livery commission iu the exercise ot its powers and functions is subject to the jurisdiction of the court:. Proceedings before an adjustment commission cannot be held bad for want of form, nor are they liable to be challenged, reviewed, quashed, or called in question in any other court than the Court of Review. If uo appeal against a decision of a commission is lodged within the specified time the order can be scaled by the court and thereupon declared to be an order of the court. Advice to Mortgagors. Officers can be appointed to advise and assist mortgagors, lessees, anil guarantors iu relation to their rights and powers under the legislation. Any mortgagor, lessee, or guarantor under a’ mortgage or lease to which the legislation applies can make application for an adjustment of his liabilities, livery such application is to be tiled in the office of the court nearest to the place where the mortgaged or leasehold properly is situated. Instead of filing his application himself any applicant can deliver it to the postmaster at any post office lor it to be sent to the projier office of the court, and in such cases the date of delivery to the postmaster is fixed ns the date of filing the application. Every such application is to be filed accompanied by u complete list of creditors and debtors of the applicant, together with a statement containing particulars of his assets and liabilities, and of the securities held by any secured creditors. A copy of the application is to be served by the applicant ou his mortgagee or lessor. No applications can lie filed after January 31, 1937, but the court has power, to extend the time for filing the application to February 28, 1937. iu eases where it is satisfied that the failure to file any application before the end of January was unavoidable or excusable.

If a mortgagor or lessee has defaulted in respect of any of his obligations under the mortgage or lease and has not filed any application for adjustment of his liabilities, file mortgagee or lessor or guarantor can make application for an adjustment of the mortgagor’s or lessee’s liabilities. In such cases no application can be filed after January 31, 1937. Such applications are to be filed in the office of the court nearest to the mortgaged or leasehold property, and a copy of the application is to be served forthwith by the mortgagee, lessor, or guarantor ou the mortgagee or lessee. Details of Financial Position. Within 21 days after the service ou hint of such an application the mortgagor or lessee is to forward to the registrar of the court in whoso office the application has been filed a complete list of all his creditors and debtors, together with a statement containing particulars of his assets and liabilities, and of the securities held by any secured creditors. In the event of failure on the part of a mortgagor or lessee to comply with these requirements within tlie stipulated time without sufficient cause a commission can order that the mortgage or lease concerned be placed outside the scope of the legislation. Notices for the adjustment of rural mortgages made under the Mortgagors Final Adjustment Act, which are still pending, are deemed to be applications under tile present Act, but if such application has ceased to be subject to the former Act, a new application is necessary.

Any person whose name appears on any list of creditors or debtors filed by an applicant, or any other person who claims in writing addressed to the registrar that bo is a creditor, has authority to inspect the ’list and the filed statement of the applicant's assets and liabilities, and any amendment of such list. It is an offence punishable by a fine of £5O for anyone not being a creditor of the applicant to make knowingly a false representation to the registrar that he is a creditor. Inspection by the authorised agent of a creditor or debtor is permitted.

Hearing of Applications.

Applications for the adjustment of liabilities will ibe referred by the registrar to au adjustment commission, unless the court directs that it intends to deal with the application itself. The commission to wihich the case is referred is to fix a time and place for tlie hearing of the application, and notify tlie parties concerned. In the case of a farmer applicant all creditors are to be notified, aud with other applicants notification of the hearing is to be sent to such creditors as the commission considers are interested in the application. Applicants and creditors are entitled to appear at the hearing personally or with a lawyer or agent, and to call evidence. The commission is empowered to obtain the opinion of expert valuers if that is required. If it is necessary or desirable iu the interests of a creditor or guarantor, the liabilities of an applicant can be adjusted, although the whereabouts of the latter is unknown or he iinay have failed to comply with auy of the obligations imposed on him by the legislation. The commission has to make an order determining whether the applicant is a farmer applicant, a home applicant, or is an applicant other than a farmer or home applicant; the value of any property of the applicant other than his interest in any farm lands; the basic value of the applicant’s interest in any farm lands; the basic rent of any property held by the applicant as lessee under any lease; whether or not the applicant is entitled, to retain any property that is subject to an adjustable security or is comprised iu an adjustable lease, or of any part of the property; and the amount of principal and other moneys secured on any property of the applicant by any adjustable security, after allowing for any remissions made in accordance with the legislation. Adjustable Securities. In determining the amount secured by an adjustable security a commission is-to take into account all interest that has accrued due before the date of the order and has not been remitted. It may remit tlie whole or any part of such interest, whether or not it has been capitalised, ot tlie whole or any part of the 10 per cent, penalty on overdue rates. It can also remit any amount claimed umlei* any adjustable mortgage for costs incurred by the mortgagee at any time alter August 25, 1930. , The basic value of the interest ot any applicant in farm land means the productive value of the land concerned, lhe productive value is fixed, at an amount equal to the net annual income that can be derived from tlie laud by the average efficient farmer, capitalised at a rate yet to bo fixed. To ascertain the net annual income tliere shall be deducted iroin the gross income that can be obtained all expenses other than capilTi expenditure necessary for the production of such income. Tlie amount of the grows income will be determined by reference to the prices received for farm products over a period from eight to ten years immediately prior to July 31, 1935, and tliese prices can be fixed by tlie Governor-Genernl by Order-in Council. EMpenses involved in the production o. the income include rates and tuxes, reasonable remuneration for the work performed by the applicant or any other person, and interest on tlie average an- - lilial value of tlie stock and chattels re- ■ quired to be used iu the farming operations Bii<i computed at a rate yet to oe fixed by Order-in-Council. Basic Rent. The basic rent is such rent as a com* I mission considers a fair rent to serve ns - a basis for the adjustment of liabilities. . 11l fixing lhe basic rent the commission i is to have regard to the value of tlie property, or in the case of farm lands the : productive value of tlie land, the value . of the lessee’s interest, in the jmproyements

on the property and all other relevant considerations.

In di'teruiining whellier an applicant is entitled to retain farm lands or other property the commission is to take into account tile conduct of the applicant in relation to the care of the property and the disbursement of his income, and whether any relief that might be granted would be reasonably likely to enable tlie applieauL to meet bis future liabilities. In the case of farm lands the commission lias also to consider the extent to whieli file area of the farm exceeds or is less than the area required to enable the applicant to obtain a reasonable standard of comfort for himself and his family.

Tlie moneys secured on farm lands can be reduced by a commission to an amount equal to the basic value, and the balance of the amount originally secured then becomes unsecured and an adjustable debt. Whether or not there has been any reduction of tlie amount secured by a mortgage, a commission lias power to wiry auy of the terms of the mortgage. Surdi variations can provide for repayment by instalments of table mortgage or else on fixed dates on flat mortgage. A commission can make an order for the postponement, capitalisation, reduction or remission of any interest payable either in respect of a period before or after the date ol the order. Rents from Leases. The rent, payable under any adjustable lease wijl be reduced to the rental value of the property, and the arrears of rent can be treated as an adjustable debt. A comntission eau also vary the provisions of an adjustable lease, whether or nut the rent, payyble is reduced. A commission can order the sale o£ a property subject to an adjustable security if it considers the applicant is not entitled to remain on the property or has elected to abandon it, and if the net proceeds of tlie sale are not sufficient to pay the amount secured the amount remaining unpaid will be treated as a debt dim by the applicant to the person entitled to the security and will be deemed to be an adjustable debt. If a commission so orders a vendor-mortgagee will have the right to repurchase a property at the price he received subject to. allowances for improvements and depreciation. Where there are two such mortgagees preference is to be given to the mortgagee under the mortgage last registered.

Moneys secured on a property*that is abandoned are deemed to be an adjustable debt. Adjustable debts are to .be discharged except so far as a commission provides for their payment iu whole or in part. Bower is given a commission to give priority to moneys advanced iu respect of farming operations. It also has power to vary hire purchase agree* meat affecting the chattels of farmer applicants. Borrowing for Improvements. Where the commission is satisfied that it is necessary to expend money on the improvement of the applicant's farm laud in order to increase its productive capacity, it can make orders for the borrowing of money on the security of any property, and if necessary iu priority to any other mortgages ou the property. No concession, benefit or discharge from liability granted to any mortgagor, lessee or guarantor, will have the effect of relieviiuj auy other person from his liability under a mortgage, lease or guarantee. The liability or obligation ot any applicant under a guarantee in respect of an adjustable mortgage or adjustable lease is deemed, to be an adjustable.debt, and liable to be dealt with accordingly, except to the extent it might othrwise be secured. Until after January 31 next, and it an application has been, tiled until it has been dealt with, all mortgagees, lessors, creditors or other persons are prohibited, without tlie consent of the court, from taking uuy action or exercising any rights in respect of any property subject to a mortgage or comprised iu. a lease, or in respect of any debt that w adjustable. There is power to reopen transactions iin cases wher a mortgagee, lessor or creditor has completed auy prohibited act between the time of the introduction of tlie legislation on August 25 last and its passing on October 1 last. In such cases tlie court can .reinstate the parities as nearly as possible in their former positions. The court has. authority to make orders protecting creditors from actions intended to defeat their claims. Applicants are prevented without the consent of a commission from disposing of their property while an application for relief is pending, and a farmer applicant is prohibited from obtaining credit in excess ot £2O without disclosing that he has an application pending. The court cun dismiss uny up plication tif it is satisfied the application is frivolous or vexatious or is made solely for the purposes of delay. The GovernorGeneral by Order-in-Council can fix the maximum fees that can be charged by a solicitor for appearing in proceedings before a commission or the court. Fire Insurance Moneys. Tlie court or a commission can order that fire-insurance moneys, received by any mortgagee or lessor in respect ot any property subject to a mortgage im to be used for the restitution of the building. Orders of the court are exempted from the payment of stamp duty. It is lawful for any trustee to agree to the adjustment of the liabilities on behalf of the party whom he represents. The count and commission are to. endeavour to promote voluntary adjustments wherever possible, but such adjustments will not become operative until embodied in an order of the court. No covenant or condition, contained, m any document executed before or after October 1, by which a mortgagor, lessee or guarantor contracts out of the Act will be recognised. Any mortgagor under a mortgage executed before October 1 last can give notice to his mortgagee at any time hefore the end of January next requiring him to reduce tlie rate of interest to such a rate as set out in the notice. It the mortgagee fails within a month of receiving the notice to reduce the rate of interest accordingly the mortgagor is then entitled at any time within the ensuing two months to repay the principal secured, together with interest up to the date of repayment only. In cases where the mortgage is a table mortgage every instalment of principal aud interest is to be reduced by an amount equal to the reduction of interest. Reductions of interest payable on certain mortgages and leases which were provided for in the National Expenditure Adjustment Act, 1932, are made permanent.

Every person who is liable under the provisions of a mortgage or a lease (excepting the present owner of tlie mortgaged property, or tlie present holder of the leased property) will be discharged and freed from that liability unless the mortgagee or lessor serves on him before January’ 31 a notice stating Unit he holds the mortgagor or lessee to his liabilities. The mortgagor or lessee on. receiving such notice may make the ordinary application for adjustment before January 31. In special circumstances tlie court may allow a late notice to bo served not later than February 28, 1937, and in that ease the mortgagor or lessee may apply for adjustment within one month after receiving Hie notice.