LAW AND MORALITY

Evening Post, Volume CXVI, Issue 75, 26 September 1933, Page 6

LAW AND MORALITY

(To the Editor.)

Sir,—The lengthy letter of Mr. William Macalister, of Invercargill, which you published at the request of the chairman of the Southland Electric Power Board, dealing'with the legal and moral aspects of the said hoard's action in' refusing ■to pay its English creditors and bondholders in, English money, is unconvincing. In paragraph 1 he states that the currencies of Great Britain, Australia, and New Zealand are separate and distinct one from the other. This, of course, is true, but was; equally true in 1921, when .the Southland Electric Power Board went to London to borrow some "English" money.

In paragraph 2 Mr. MacaHster states that "iii 1921 the New Zealand pound and the .pound" sterling (the English pound) j ■we're1 of equal .value and were at parity, and had been so for many years." This Statement is not correct; the New Zealand pound was at a discount in 1921, and fluctuated considerably in value as compared with the English pound. New Zealand money has always fluctuated in value according, to the state of the exchange market, which, of course; is (or was) governed by the volume of exports and imports. Inquiry from 'any." of., the banks trading in New Zealand will prove the above statement. ■-.'''- ■■■ ''■'.. ■'■:■ Mr. Macalister also states (paragraph 2) that "the lenders (the English bondholders) believed, ■ and 'rightly so,' that they paid in pounds sterling .(English money) and that the borrower (the Southland Electric Power Board) believed, and 'rightly so,' that it received 'New Zealand pounds."' The' second "rightly so" in the- above statement is surely incorrect. The borrowing and lending contract was made in England and the money loaned was paid over in England, and the parties to the contract must both have known it -was English money (sterling) that changed hands at the time. Any exchange difference as between the English pound and the New Zealand pound, whether favourable or otherwise to the Southland Electric Power Board at the time, would be entirely at the risk of the borrower, and the ruling rmte of exchange between England and New Zealand, even if at parity (which it was not), would not come into the transaction, as it was an English contract made in London. 1 The fact that an extraordinary decision has been 'given. .by the second highest Court of the Empire on a somewhat similar case between Australian borrowers and English lenders does not settle even the legal aspect of the matter, and certainly does not settle the moral.

Mr. Maeiilister says (paragraph 6) that "the real moral issue in connection with the payment of interest on these debentures arose with the unprecedented fall, in the price of primary products , after, the debentures were issued." This is not so. The price of New 'Zealand" primary products ■ rose considerably afteii , 1921» (the date on which the loan was obtained and the debentures .were issued), and no-addi-tional or increased interest was offered or paid to the English bondholders because of that, yet because the market has now turned in the opposite direction and a fall in prices of primary products has occurred Mr. Macalister and the Southland Electric Power Board apparently consider that the English bondholders should receive less than the amount of sterling English money than they expected and received in the past in accordance with the terms of their bonds. , ■ :

Where is the morality or justice in New Zealand borrowers refusing to continue to pay their English creditors and bondholders English money as interest on., English money loaned just because prices for New Zealand primary products have,: now fallen? The moral issue does not arise with the fall in prices (nor did it arise with the rise in pric.es). It arises in the departure from the plain' terms of the English contract whereby English money was loaned and borrowed.—l am, etc., , i A NEW ZEALANDER.