POWER BOARD CASE

Manawatu Standard, Volume LIII, Issue 251, 20 September 1933, Page 7

POWER BOARD CASE

DISMISSAL OF SUIT. INTEREST PAYMENT OBLIGATION COMMENT BY JUDGE. (United Press Association—By Electric Telegraph.—Copyright.) SYDNEY, Sept. 19. The Equity Court dismissed with costs the suit of the Wanganui-Rangi-tikei Power Board against the A.M.P. Society in relation to payment of interest on loans. The judgment of the Acting-Chief Justice, Sir John Harvey, said it was clear that the parties intended the contract to be a New Zealand contract from first to last, and that it was never intended that the obligation to jj-ay interest at Sydney was to be subject to any law which the State of New South Wales might make. Sir John Harvey held that if a resident of New South Wales borrowed money in England, contracting to pay interest for it there, and returned to New South Wales before his creditors could sue him in England, it obviously could not be set up if the creditor followed him to New South Wales that he was discharged from the obligation to pay fuil interest by reason ot the existence of the New South Wales Interest Reduction Act. It was too clear for words that these loans and security were to be interpreted and enforced according to New Zealand law. The fact that the debentures were made payable at Sydney was a mere accident, and whether that was an obligation which was an inherent part of the contract and could not be varied except by the consent of both parties seemed unnecessary to consider. QUESTIONS FOR DETERMINATION. The hearing of the case began in the Equity Court last Thursday. The argument, states the Sydney Morning Herald, was on questions submitted to the Court for determination by originating summons with respect to the New South Wales Interest Reduction Act, 1931 (No. 44). The plaintiff was the Wanganui-Rangitikei Electric Power Board (New Zealand) and the defendant the Australian Mutual Provident Society. In December, 1924, May, 1925, and March, 1926, agreements were entered into by the parties by which plaintiff agreed to borrow and defendant to lend certain money which plaintiff had been given authority to raise. The first loan was of £149,999 repayable by instalments of in*, terest and principal by debentures of £4935 16s 9d each, the first debenture payable on June 23, 1925, and two being payable each year thereafter on December 23 and June 23 until 1961. The second loan was of £IOO,OOO, repayable as to principal and interest by. debentures of £3290 11s 7d each, the first payable on November 1, 1925, and thereafter half-yearly, to 1961. The third loan was of $60,000, repayable as to principal and interest by debentures of £1947 7s each, the first payable on October 1, 1926, and thence half-yearly to October, 1962. The interest was 5| per cent. and all the debentures were payable at Sydney. In October, 1931, plaintiff, by arrangement with defendant, paid to defendant’s head office at Sydney £15,126 8s 4d in Australian currency, to he applied in payment of future instalments of principal and interest, plaintiff to be credited with interest at the rate of 3 per cent, per annum in the meantime on such advance payment until the sum might be absorbed in payment of instalments. On the passing of the New South Wales Interest Reduction Act, 1931, plaintiff claimed that the. Act applied to its obligation to pay interest included in the instalments thereafter payable to defendant. This claim was disputed by defendant, it being contended that plaintiff’s obligation to pay sucli interest was not subject to the Act. In December, 1931, defendant, in pursuance of the arrangement, applied out of the amount two sums of £3290 11s 7d and £4935 16s 9d respectively in payment qf two instalments of these amounts which fell due in that month ill repayment of debentures. Plaintiff protested that the Interest Reduction Act applied to the interest included in the instalments (debentures) and the sums so credited were applied without prejudice to the questions arising under the Act. All instalments paid thereafter were under protest of defendant and without prejudice reduced by nine-fortieths of so much of the interest as included therein, as accrued on and after October 1, 1931, the balance of the credit being applied accordingly. Subject to this all instalments were paid and debentures redeemed in accordance with the deeds of agreement and debentures under which they were respectively payable. The debentures in respect of which the reduced amount of interest only liad been paid were not delivered up to the plaintiff and defendant claimed to be entitled to retain them until the whole amounts of the debentures liad been paid. The Court was asked to determine: (1) Whether the Interest Reduction Act, 1931, applied to the obligation of tlie plaintiff to pay so much of the interest included in tlie instalment payable to defendant as accrued on and after October 1, 1931 : (2) whether the plaintiff was entitled to redeem debentures which fell due since October 1, 1931, upon payment to defendant of tlie total capital amount included in such debenture, together with the amount of interest included therein reduced by' nine-fortieths on such of such interest as accrued after October 1, 1931. MANAWATU-OROUA BOARD. POSITION REGARDING LOANS. For eighteen months the Mana-watu-Oroua Power Board has deducted 4s 6d in the £1 off all interest paid on loans domiciled in Australia. This action has been taken under instructions from the New Zealand Audit Department, which intimated that if the full amount of interest , was paid, the amount not deducted —22J per cent. —would be a charge against the board members, pending final determination of the matter. Following out these instructions, the board holds £5050 on account of the deduction from last year’s interest account, and as half of this financial year has elapsed, the sum in hand has been further augmented to a corresponding extent. It appears in the books of the board as a contingent reserve. Of the loans of £507,000 to which the board is committed, some £408,000 is domiciled in Australia, and the interest bill payable there is about £23,000 yearly. The decision in the WanganuiRangitikei Board’s case, which is regarded as testing the issue for all similarly placed bodies in New Zealand, has a direct bearing on the position of the Manawatu-Oroua Board, so far as the general principle

involved is concerned. However, the Wanganui-Rangitikei Board’s case is slightly different in that it raises some further issues with which the local board is not concerned.