PRIVY COUNCIL

Evening Post, Volume CXXIV, Issue 119, 16 November 1937, Page 11

PRIVY COUNCIL

MOUNT ALBERT APPEAL

A NEW ZEALAND CONTRACT

NO REDUCTION

(From "The Post's" Representative.)

LONDON, October 20,

The Mount Albert Borough, Auckland, has been unsuccessful in its appeal against the decision of the New Zealand Court of Appeal concerning a dispute with the Australasian Temperance and General Mutual Life Assurance Society. The Privy Council has agreed that the borough is not entitled, under the Victorian Financial Emergency Act of 1931, to a reduction in interest, payable in Melbourne, on a loan of £130,000 issued by the society in September, 1926. The appeal was heard In July by Lord Atkin, Lord Macmillian, Lord Wright, and Lord Maugham. Judgment was delivered on October 18 by Lord Wright. "On the whole case," he said, "their Lordships are of opinion that the New Zealand Court of Appeal was right .. . and that the appeal should be dismissed with costs. They will humbly so advise his Majesty." The borough's appeal was placed before the Privy Council by Mr. J. O'Shea (Wellington). The judgment is lengthy, running to eleven pages. "This appeal," it states, "raises a question described as the conflict of laws. The question is whether the obligation to pay in Melbourne the interest on debentures issued in New Zealand by the appellants (the Mount Albert Borough) is affected by a statute of the State of Victoria reducing the rate of interest. CAUSE OF THE ACTION. "The action was brought by the respondents (the. society) to recover £446 17s 6d as being the balance short paid in respect of interest to the respondents as holders of debentures for a total sum of £130,000 issued by the appellants. The respondents claimed that the interest due on March 1, 1935, was £3090 17s 6d r but the appellants paid £3250 and claimedthat this sum was sufficient to satisfy the respondents' rights, on the ground that as the interest was payable to the respondents at Melbourne, the payment was governed by the Financial Emergency Act, 1931, of Victoria, and amending Acts, which provided for reductions in interest payments. The question is whether the Act applies to the appellants' obligation. .' . . Their Lordships agree with the unanimous judgment of the Judges of the Court of Appeal that the Acts do not furnish a defence to the appellants for various reasons. ... "The debentures and the interest coupons in so far as they give a security on real property, namely, a portion of the local rate in New Zealand, are beyond question governed by the New Zealand law. The security can be enforced only in the courts of New Zealand and in the manner provided by the Loans Act (the Local Bodies Loans Act, 1913). It is not disputed that these rights are governed by New Zealand law. But in their Lordships' judgment it is equally true that the personal obligation to pay is a New Zealand contract, governed by New Zealand _ law. It seems impossible to sever this personal covenant from the mortgage provisions which secure it. Indeed, the whole tenor of the transaction is only consistent with its being governed by New Zealand, law. r, "The loan was1 agreed- in New" Zealand; the -money under the loan was paid by the respondents to the appellants there. The appellants were a statutory body in New Zealand which in borrowing were acting under the statutory powers contained in the Loans Act as set out above. The respondents carried on business in New Zealand as well as in Australia. It is true that the place of repayment of the loan and of payment 6f interest from time' to . time was to be Melbourne, in Australia. But even that was fixed in accordance with the Loans Act of 1913, which required payment of the debt to be at the place/ within or out of New Zealand, named in the debenture so that the obligation to pay has statutory sanction. "Mr. O'Shea, i n his able and exhaustive argument, has contended that the payment is governed by Victorian law because Victoria is the place of performance, and that Victorian law for this purpose includes section 10 (1) of the Financial Emergency Act. He further contends, that section 19 01) applies to the debt because it is a specialty, debt and the coupon, which is the document of title, must necessarily be presented at the place of payment in Melbourne when payment is due and demanded, and thus at the relevant moment the lex situs applies so as to introduce the' statutory reduction of interest. "Their Lordships are not prepared to accept either contention. While they think that the lex situs applies to the security in New Zealand, they do not think that the lex situs of the actual coupon can be applied to the instrument, whether or not the personal obligation to pay is properly regarded as a specialty debt. Nor can they accept the view that the obligation to pay is here governed by the place where it is stipulated that ; payment is to be made/in the sense-that the amount of the debt as expressed in the instrument creating it can lawfully be varied by the Victorian . Financial Emergency Act so r.s to bind a foreign jurisdiction, or indeed at all, "So to hold'would be, in their Lordships' judgment, to confuse two distinct conceptions; that is, to confuse the obligation with the performance of the obligation. 'It is well established in the law of England and of New which in this.respect follows it, that the proper law of a contract has to be first ascertained where a question of conflict- of laws arises. \ THE SINGLE GROUND. ; "Their Lordships," judgment . continuesj, "think .that the. appeal can be determined • on-the single ground that in their Lordships' judgment,, which again agrees with that of the Court of Appeal, the Financial Emergency A'ctp do not apply: to th^ese debentures,' otto the interest payable under them. This is the, subject of questions which the Court'of Appeal have: answered in the negative, holding that the Victorian statutes have no application to the debentures or; coupons. ' • "It is true that the debentures are mortgages in the sense in' which the mere Vord mortgage is used in the Act of 1931! But they are not, jii their Lordships', judgment, mortgages within the, meaning; of the Acts.' To hold that the Act applied to the debentures 'would be to attribute to the Victorian legislature an intention tp legislate in regard -to ' matters lying outside.its territorial' jurisdiction, because the land chaYged under the debenture is in New' Zealand. The authority' vested by the''Victorian Constitution in, the legislature of the State of Victoria is 4o legislate for the peace, order, and good government of Victoria. .' ( ," ■ : . ■ . ; "It is true that the principal moneys and the interest are payable in Victoria, but they are payable under New Zealand contracts and furthermore to change the amount of the debt would be' to affect the security on the land, which' is extraterritorial so far as Victoria is concerned. There are the

further points that the extent of the security is deffried'by the debt, and that,fcoth the debt and. the security arfe fixed [by'.the'New Zealand statute, so; that tp acc'^qV .to .the appellants' contention. would, be to treat a Ne\y Zealand Act-as. varied in; regard to New Zealand- contract ■'by;;Actsi,:of i the. Victorian'legislature." ' .. ; :

: In conclusion, the judgment cites A case from' the' High Court of Australia, the Warigah.ui-Rangitikei Electric Power Board, .v. .Australian Mutual Provident Society, and says: ; "This authority seems on the whole to support the view that the debentures and interest in question In this appeal are outside the scope of the Victorian Act,"- . ' ■ ' •