SPECIAL RATING AREAS.

Lyttelton Times, Volume CXVII, Issue 17933, 2 November 1918, Page 11

SPECIAL RATING AREAS.

'» ntAMWAY CASE BE* ORE SUPREME COuivf. . An important case concerning tramway rating was hoard in tho Supicme Court yesterday, before his Hou.,.- Mr Justice llerdman, between tho Attorney-Gcii-yvtil ex relatione William Hinetto Wnisor, of Spreydon, builder and contractor', plaintiff, and tho Cnrlstchurch Tramway Board, defendants. The relator is Mayor of the borough of Spreydon, and is also a ratepayer of the special rating area known as ihe Hackthorne special rating area. The plaintiff prayed (1) for an injunction against the defendant board, restraining it from tho keeping of separata accounts in respect of tho tn»mt in the said Hackthorne special rating area, or, if it should be held that the defendant board was legally entitled to'keop such separate accounts, (2) for an injunction restraining it from charging the revenues of such tramway for depreciation and renewals in priority to applying such revenues to the payment of interest and sinking fund on the special loan, and for such further or other injunction as the Court might deem meet.

Mr A. F. Wright appeared for the plaintiff, and Mr S. G. Raymond, K.C., with Mr J. J. Dougall, appeared for tho defendant board. Thostatcment of defence said .that at the end of the year 1907 the board, in exercise of the statutory powers vested in it, had constructed and was working various lines of tramways in its districts, nil ot which were inter-conucctcd and were worked with a common system of management, but part of which known as the Riccarton-Sockburn line (which had been added to the original undertaking at a later date) was treated in tho board's accounts ns a separate undertaking, and its accounts kept distinct from those of the rest of the lines vested in the board's undertaking known as and referred to as the main area. At this date one of the lines terminated at the Dyer's Pass Road, and in June, 1.908, a petition was presented to the board on behalf of certain residents to have this line extended to the foot of the Hackthorne Road. After this proposal had been rejected by the ratepayers of the main area, the Hack' thorne Committee proposed to the board that notwithstanding such rejection the extension should be made, either by a loan raisci' by special order, or secured by a rate on n, special rating area to bo formed. The board replied to the committeo that it could not, under the circtim. stances, agree to raise money for tho purpose of laying a line to Hnckthorno by special order, and that in the event of a special rating area being reouested by the ratepayers concerned it would charge the special account with the operating expenditure, interest, sinking fund and depreciation on the section from Tennyson Street to the foot of Hackthorne Road, and would credit the account with one-third of all threepenny tickets (cash and concession) on the Cashmere Hills-Edgewaro Road lino one-fourth of the fourpenny tickets, and one-fifth of the fhrepenny tickets. In ensuing correspondence, .the defence stated, a letter dated April 1, 1910, from the secretary of tho committee, criticising a board report, made no objection to tho separate account, noi to the inclusion of depreciation charge. The whole of the negotiations were traversed, and in the concluding paragraph the defence stated that the request for the Hackthorne Road line was made by the committee of the ratepayers as for a separate and distinct) undertaking on the same lines as the Riccarton-Sockburn line, and such request was received by tho board upon that footing, and the proposed line was eventually constructed upon that basis, and the "board had, under section 50, from the timo of the construction of the said lino, kept the accounts of such line distinct from those in the main area, and in the same manner as 1 the accounts of the Riccarton-Sockburn line were kept. The board had nevei levied any rate upon the Hackthorne Road special area except for the purpose of paying interest and sinking fund of the said special loan for £24,000. A lengthy statement of facts which had been agreed to by the parties, was placed before tho Court. It stated that the capital value of the rateable lands included in the Hackthorne special rating area in January, 1911, amounted approximately to £196,064, of which lands to tho capital value or approximately one-half had formed part of the main area of the Christchurch tramway district since its inception, and as such were then liable together with other portions of the main area, to bo specially rated in respect of interest and sinking fund for the loans raised by the board, except those raised in respect of the Riccarton-Sockburn subdistrict. At the time of the passing of the loan proposal for the construction of the Hackthorne line, there were certain special rates made and levied by the board over the lands in its district (including those in that portion of the Hackthorne special rating area which had always been in the original tramway area), to provide interest and sinking fund in respect of loans for tramway purposes. These rates, however, had never actually be»n, collected, as the profits of the '.. ard had proved more than sufficient to provide interest and sinking fund. The Christchurch Tramway Board had since the opening of tho Hackthorne line purported to treat it as a separate and

distinct tramway undertaking. Until the year ended March 31, 1915, no allowance or credit was given by the board in the separate account of the JElackthorne line which the board purported to keep of the induced traffic, although that must have been considerable. Fo r the year ended March 31, 1916, the board credited the Hackthorne line with 0.45 d per passenger carried on the Hackthorne line, on the assumption that such passengers had been carried on the lino from Cathedral (square to Barrington Street, but the board stated that it granted such credit not as a matter of right, but as an ex gratia allowance. In addition to that ex gratia, allowance the board had, since March 31, 1916, allowed tho Hackthorne special rating urea (together , with other special rating areas), the free use of certain " central assets," intimating that it was debiting against such special rating area charges in respect of tlieso "central assets" only for which additional money had to bo provided by tho board aj a result of the construction of the various extensions.

Tho accounts of the Hackthorne extension set out in the board's annual abstract of income and expenditure showed that, if interest and sinking fund were excluded there had been a profit year by year on working expenses on the Hacktiiorno lino, as follows: Year ended March 81, 1912, £l2 18s 9d; 1913, £535 4s 2d; 1914, £420 10s 3d; 1915, £094 Is 6d; 1916. £172 2s6d; 1917, £557 15s 4d; 1918, £836 3s 8d ; a total to March 31, 1918, of £3528 16a 4d. That included a sum of £1552 13s 3d allowed for induced traffic. The amount of interest and sinking fund debited against the Hackthorne special rating area amounted to £5343 12s, made up as follows :—Year ended March 31, 1913, £956 14s Id; 1914, £894 4s 6d; 1915; £955 2s Id; 1916, £869 9s 4d; 1917, £BOO lis 3d; 1918, £BO7 10s lid. In computing the annual accounts of the working of tho Hackthorne tramway, showing tho manner in which the' revenues derived therefrom had been dealt with, tho board had made, inter alia, charges for renewal and depreciation reserves after providing for tho payment of interest and sinking fund on the loan of £24,000, and had carried the same to reserve funds known as the renewal fund, and the depreciation fund respectively. Tho amounts carried by the board to such reserves had been treated by the board as a first charge upon the takings from the line, after payment of operating charges. The amounts so carried to the renewal and depreciation funds of the board out of revenues from the Hackthorne line were as follow:—Year ended March 31, 1912, £l4l 14s; 1913, £782 8s 8d; 1914, £787 3s; 1915, £775 13s 4d; 1916, £703 3s 6d; 1917, £707 9s 4d; 1918. £702 16s Id; total, £4600 5s lid. The effect of setting aside these reserves and charging them in priority to tho payment of interest and sinking fund had been to throw the Hackthorne line accounts, in some years, wholly into debit, and in other years to greatly reduce the amount at credit of the account, and had so depleted the credit that there had been insufficient moneys remaining to pay interest and sinking fund in respect of the loan of £24,000. In consequence of the setting aside of the reserves mentioned the board, 'n ordr to provide for the payment of interest and sinking fund in respect of the loan, yearly levied and collected a special rate upon the lands in the special rating area to tho following amounts: —Year ended March 31, 1913, £1052 7s 8d; 1914, £956 Is 8d; 1915, £955 2s; 1916, £640 15s 7d; 1917, £465 0s Id; total to March 81, 1917, £4069 7s 10d. No rates had been collected for year ended March 31, 1918._ With regard to the general financial position of the board, the statement of facts set out that the total loan liabiliy of tho board was £569,250. Tho board had conducted operations since June, 1905, and up to March 31, 1918, had written off preliminary expenses and transfer! ed to various reserves tho sum of £396,147 10s 4d, after paying for all repairs and general upkeep.' OU the total loan liabilities of the board up to March 31, 1917 (£569,250), it had assets brought into existence by moneys expended by the board, of a total sum of £721,186 12s 4d. The board had expended out of tho general revenuo from the tramway system the sum of £161,936 12s 6d, on putting down new lines and duplicating certain lines, and other capital expenditure. On March 31, 1918, £152,836 6s 7d had been parried to the credit of tho depreciation reserve, and £135.042 15s Id had been carried to the renewal fund reserve.

In opening tho caso for the plaintiff Mr Wright said that he contended first that the hoard had no right to keep separate accounts in connection with their _ particular system. ■ Tho whole question was a question of-law. It depended upon whether tho Hncktkorne system was a part of the tramway system of Christchurch or a separate entity. Assuming that the Christchurch Tramway Board was entitled to keep separate accounts it was contended it had kept those accounts incorrectly. The, hoard had set aside reserves before paying its capital account and sinking fund. In tho Wadestown case it was stated that no provision could be made for depreciation unless it was made from free assets. _lf ITaekthorno was a separate undertaking its first and paramount charge should be tho payment for interest and sinking fund. If tho Hackthorno line was not a separato undertaking there was no authority to keep separate accounts. Hackth'orne stood in the position of guarantors. The line could not be treated as a separate undertaking unless it was so constituted by statute as in the caso of Riccarton, or by Order-in-Council, a poll of ■ tho_ ratepayers being taken upon the basisof a separate undertaking. Neither in the Order-in-Council, nor in the voting paper was it set out that Hackthorno was to be a separato undertaking with separate accounts. Ho contended there was no doubt that Hackthorne had not been created a separato undertaking by statute. Mr Wright then dealt with tho various phases of the Hnckthorne lino case as compared with the extensions to Fendalton and Papanui, and the service to Dallington." In support of his argument ho quoted Appeal Court decisions in the Wadestown case, and another Wellington caso concerning the Knrori-Northland service. Counsel finished his address at 3.15 p.m., but as Mr Raymond said ho desired to consider the authorities quoted by His learned friend, continuation of the caso was deferred till nest week, on a date to he fixed. j The Court thsn rose. j