LONDON LOANS

Manawatu Standard, Volume LIII, Issue 245, 13 September 1933, Page 2

LONDON LOANS

. DOMINION CURRENCY USE. SOUTHLAND BOARD’S DECISION. Per Press Association. INVERCARGILL, Sept. 12. By eleven votes to one the Southland Electric Power Board, at a meeting to-day, decided to rescind its former resolution to pay interest on its London loans in sterling, and later carried a resolution to the effect that it would pay in New Zealand currency, but would facilitate a test case regarding the matter if the bondholders desired a ruling.

The question of interest payments was the main topic for discussion at the meeting, which was a protracted one, and several of the issues were considered in committee. The majority of members agreed that the board was under no legal obligation to pay in sterling, and that, if there had been a moral obligation to pay, this had been nullified by the action of bondholders in England in refusing to accept a lower interest rate, as practically all other bondholders had done. It was stated during the discussion that the board’s decision would mean a saving of £20.625 to users of electric power in Southland. Mr W. McChesney moved the following resolution: “That, seeing the contract between the London debentureholders and the board gives the board the option of paying interest instalments in New Zealand currency, and that the Acting-Prime Minister, lit. Hon. J. G. Coates, advised the board to take steps to apply for a test case in London with a view to enabling the board to pay interest in Now- Zealand currency; and after having received the opinion of Sir Gerald Hurst, K.C., London, supported bv the opinion of the board’s solicitor, Mr William Macalister, that the contract between the Loudon debenture-holders and the board enabled the board to pay interest in New- Zealand currency ; and, as a result of the Government refusing the boa.rd the advantage of temporary financial arrangements in London, which was assured, and thereby saving exchange amounting to £20,000 per annum, the resolution of the board carried a.t a special meeting on August 4, agreeing to pay the September instalment of interest in sterling, be rescinded.”

GOVERNMENT’S POSITION. “In asking the board to rescind the motion carried on August 4,” said Mr McChesney, “I think it will be agreed that if the motion is rescinded it will be one of the most momentous decisions arrived at by the board since its inception. If it is not rescinded, the board will have to find £20,625 as exchange on its interest payments. In the meantime provision is made for the payment of interest . instalments in New Zealand currency. That is not disputed. It is the legal position. The board has had legal advice on the matter from Sir Gerald Hurst and his opinion is that the board has a good case and should succeed. Furthermore, when the board first considered the matter, Mr Coates advised the board to have a test case.”

The chairman (Mr W. Hinchey): I don’t think you should say that Mr Coates advised the board to have a test case. Mr Coates raised that point when we were in Wellington and said that be had not advised a test case. He had merely suggested one. It was stated, he said, that the Prime Minister, Rt. Hon G. W. Forbes, gave a pledge tha.t the board would make this payment in sterling. If lie did so, let the Government make up the difference. The board’s trouble was caused by the Government raising the exchange rate, so the Government was responsible for the deficiency. The motion was seconded by Mr J. T. Carswell, who said: “If we pay in New Zealand currency we have fulfilled our contract. We have only got to consider our legal obligations, and there is no room for sympathy for bondholders who can only receive exchange at the expense of the people of Southland.”

Mr A. A. Mac Gibbon, who was the only one to oppose the resolution, expressed the opinion that Sir Gerald Hurst had never said that they could pay in New Zealand currency. He had asked for a test case. As lor asking the debenture-holders to take action, that was cowardly. He objected to trying to “beat” them. Mr Hinchey said that the matter was a very serious one, but he knew that member.s of tlie board had considered both sides of the question. After the resolution had been carried the following motion was adopted without dissent: “That the board, having been advised that, as a matter of law, interest is payable in New Zealand currency, resolves to make payment in New Zealand currency, with an intimation to debenture-hold-ers that the board is willing to facilitate a ruling being obtained later if they so wish.”