WHANGAREI'S LOAN.

New Zealand Herald, Volume L, Issue 15325, 11 June 1913, Page 8

WHANGAREI'S LOAN.

DISPUTE WITH DEPARTMENT.

[BV TELEGRAPH. —OWN CORRESPONDENT.] Whangarei, Tuesday. Recently the Whangarei Borough Council raised the question: " Can a State Department by Act of Parliament break its contracts?" The question arose out of ,-v demand made by the Advances to Settlers Department for additional interest on £11,000 of the streets loan.

The council applied to the State-guaran-teed Advances Office for a loan of £19,200, and after the proper form was gone through it was on June 23, 1911, finally passed at a certain rate of interest. The whole of the debentures were executed by the council, and returned to the Department with a request that the moneys should be paid as follows :—October i, 1911, £4000; April 1, 1912, £4000 April 1, 1913, £4000; April 1, 1914, £4000; April 1, 1915, £3200. The necessary permission was given, and the debentures were stated to bear interest' from these dates. The first two instalments have been received at the rates agreed to, and the Department now asks for a higher late of interest, that is 4& per cent., as provided in Sub-section 1 of Section 2 of the 1912 Amendment Act.

The Whangarei Borough Council objected to pay the increased interest rate, and submitted the case to Air. Martin, legal adviser to the Municipal Association, who supported the stand taken by the local body. The Borough Council also submitted the matter to Mr. C. P. Skerrett, K.C., of Wellington, who, in a lengthy opinion covering the points at issue, states that in his opinion the Whangarei Borough Council can insist on the h.stalments of the loan being paid, and may decline to pay any rate of interest in excess of that stipulated in the debentures. The superintendent should be invited to agree to have the question determined upon an originating summons.

It is interesting to note that the Crown law officers have ruled against the borough's contention.