INTEREST ON LOANS

Evening Post, Volume CXX, Issue 141, 11 December 1935, Page 12

INTEREST ON LOANS

VICTORIAN REDUCTIONS

N.Z. LOCAL BODIES DO NOT

BENEFIT

The Court of Appeal, comprising the Chief Justice (Sir Michael Myers), Mr. Justice Reed, Mr. Justice Smith, Mr. Justice Johnston, and Mr. Justice Fair, unanimously held today that Victorian emergency legislation reducing interest rates to 5 per cent, has no application to interest payable in Victoria on local body debentures issued in New Zealand. Over twenty municipal bodies throughout New Zealand are directly interested in the decision, and the debenture holdings affected exceed £1,000,000.

The Court's decision related to a case between the Australian Temperance and General Mutual Life Assurance Society and the Mount Albert Borough Council. The Mount Albert Borough Council borrowed £130,000 from the T. and G. Society at the rate of £5 13s 9d per cent., payable in Victoria, and claimed that by virtue of the Victorian legislation the interest rate was reduced to 5 per cent.

On March 1, 1935, the Mount Albert Borough Council paid the society £3250, being a half-yearly instalment on the loan at 5 per cent. Up to that time it had been paying at the rate of £5 13s 9d per cent. The amount due on March 1 at £5 13s 9d per cent, was £3696 17s 6d. The society in this action claimed the balance of £446 17s 6d.

By order .of the Chief Justice the following questions were ordered to be argued in the Court of Appeal:—

1. Whether the Victorian financial emergency legislation had any application to the debentures for £130,000 issued to the plaintiff by the defendant?

2. Whether the interest under the debentures was reduced by the provisions of that legislation as from October 1, 1931?

3. If the reduction of interest by Victorian legislation' did apply to the debentures was the defendant council entitled, to a refund of payments of interest made since October 1, 1931, in excess of the reduced rate, on the ground of mistake?

In judgment delivered today the Court of Appeal was unanimous that the examination of the circumstances surrounding the contract, and the law applicable thereto disclosed that the proper law of the contract was the law of New Zealand, and that accordingly the Victorian statute relied upon by the Mount Albert Borough Council did not apply, and that the interest payable under the debentures was not reduced. Each member of the Benoh wrote long judgments giving various reasons for their views, but all arrived at common answers to the questions before the Court. The first two questions being answered in the negative, there was no need to consider the third.

After judgment had been delivered, Mr. J. O'Shea, who, with Mr. A. E. Hurley appeared for the Mount Albert Borough Council, applied for conditional leave to appeal to the Privy Council.

The Chief Justice indicated that the proper course was to make that application to the Supreme Court, when application was made there on behalf of the T. and G. Society for judgment.

Costs amounting to £60 were ordered to be paid by the Mount Albert Borough Council.

At the hearing Mr. A. H. Johnstone, K.C., Mr. C. H. Western, K.C., and Mr. E. P. Bunny appeared for the T. and G. Society.