PENALTY ON RATES

Evening Post, Volume CXX, Issue 17, 19 July 1935, Page 7

PENALTY ON RATES

POSITION OF MORTGAGEE

IMPORTANT LEGAL POINT, j

Of importance to local bodies were two questions raised by Mr. J. H. Luxford, S.M., in a reserved judgment given in the Magistrate's Court yesterday; whether section 70 of the Rating Act enables a local authority to recover the 10 per cent, penalty on rates from a mortgagee as soon as the occupier has made default ,in payment of rates for six months and fourteen, days, and whether the right of the local authority to recover rates against the mortgagee depends on the making of a demand upon him in accordance with the provisions of section 61. The case was the one in which the Eastbourne Borough Council (Mr. D. J. Dalgleish) made, a claim for arrear* of penalties against the Rangitikei Permanent Land Building and Investment Society (Mr. F. T. Clere). Judgment was given for the defendant with! costs. ■ . ■ "The plaintiff corporation duly de* manded from the owner and occupier! of certain rateable property within its jurisdiction the rates due for the years 1932-1933, 1933-1934, and 1934-1935," said the Magistrate. "The rates were not paid and the 10 per cent penalty was duly, added. On February 4, 1935, separate demands for each year were made on. defendant for the amount of the outstanding rates and the penalties. Although the demands were made on defendant as owner and 'occupier, defendant's liability only arises as first mortgagee of the rateable property. Defendant paid the three years' rates, but as it declined to pay the penalties, the present proceedings have been brought to recover them. An action was commenced previously by plaintiff corporation against the owner and occupier for the rates: and penalties due for the first two years, but Owing _ to her financial circumstances judgment was not applied for, and the caset was adjourned sine die. '. ' . '

"Mr. Clere has raised three objec*' tions to plaintiff corporation's claim. J Summarised, they are: (1) As to the | claim for the penalties for the first < two years, plaintiff has elected to sue ! the owner and occupier and cannot • now sue the first mortgagee; ..(2) the demands on defendant allege that it is the owner and occupier (which it. is not), and because of these defects' the liability of the defendant does- riot arise; (3) defendant, having complied with the demands to pay rates within; the period of six months and four* teen days from the making of the, de* ', mands, is not liable to pay the 10 pet! cent, penalty. . ■■ IMPORTANT QUESTIONS. "The last ground of defence raise* two important questions. Does section' 70 of the Rating Act enable a local authority to recover the 10 per cent. penalty from a mortgagee as soon as the occupier has made default in payment of rates for six months and four* teen days? Does the right of the local authority, to recover rates against, the mortgagee depend on the making of o. demand upon him in accordance with! the provisions of section 61? It seems strange that these questions have, not been determined previously, because? they must have arisen frequently. Per* haps the explanation is (as was stated during the argument) that the local' authorities acted ori the opinion of tha! solicitor to the Municipal Corporations' Association, who advised that a mort* gagee was not liable for the penalty) 2 he paid the rates within the statu* ; tory period after the demand waai made upon him. "If the provisions of sub-section 1 o% section 70 are to be conateered alone, it would seem that once any rate be* comes due by and recoverable: front the occupier, the local authority is en* titled to commence proceedings! • against the first mortgagee of the rate* able property to recover the amount owing. That would include the pen*; alty of 10 per cent, imposed by section' 76. The imposition made by section 76 is merely an accretion to the amount stated in the demand, and. becomes ai' part of the rates due and owing. ■-'•' In', effect, sub-section- 1 of section :70 standing alone, makes'the first mort*, gagee vicariously liable for the occu*pier's default, should ■ the local authr ority elect so to treat him. In' my, view, however, section 70 must be read in conjunction with sections ,61 and 65. "A demand for rates must be made in accordance with the provisions ofi. section 61 before an action'lies/ for?' their recovery. The section does nolii say that the demand must be made pri the person primarily -liable (who, o£ course, is the occupier), but to the:person liable.- The form in which ' the demand must be made is set out in Form No. 8 in the first schedule. In order properly to complete the form, the capacity of the person from whom the rate is demanded must be shown— whether he is occupier, owner* or first; mortgagee of the rateable property. DEMAND NECESSARY. "Turning to section 65, it will b* seen that if any person fails for fount! teen days after demand to pay any rat* for which he is liable, the local-.auth*' ority may recover the same in anjf court of competent jurisdiction," com" tinued the Magistrate. ' "The wording of these two sections and of Form No. 8 in the first schedule are capable oi only one meaning—each and every] class of person from whom a rate ia) recoverable must first be sent the sta« tutory demand before the right oU action against him arises. The righti; to recover the accretion to the rate made by section 76 is dependent oni ; a period of six months and fourteen! days elapsing after the rates have beeni demanded. The demand referred tai: in that section, in my opinion, means; the demand on the person against} whom the rate is claimed. '

"If plaintiff corporation's contention was correct, it would mean that tM accretion under section 76 became parti of the rate due and owing by. th<3 occupier and the total amount could be demanded from the first, mortgagee. That would mean the first mortgagees would be liable for a further penalty) if he failed to pay the amount de« manded within the statutory period. I agree that the accretion becomes part! of the rate, but only as against the person upon whom the demand is made. Consequently, a mortgagee i 3 not liable for the penal addition un< less he fails to pay,the original amount of the rate within six months and four* teen days after the demand has been! made upon him. ... ■'■'" "Mr. Dalgleish stressed in argument' the liability of the mortgagee to; pay; the-penalty if the local authority proceeded to sell the rateable property. In! that case he contends the mortgagee would have to pay the full amount -art order to protect his security. This is true, if the mortgagee really wishes to protect his security. In most cases no doubt he would. But he ;is free t« make his election, and if he decided to( forfeit his security he is under no'fur*; ther liability. In the yievr I havej: taken of the third ground of defence,; it is unnecessary for me to consider, the other grounds, and I-will entei*j judgment for the defendant witl^ COSte.77 ' : :