THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, APRIL 13, 1931. CROWN AND RATE LIABILITY.

New Zealand Herald, Volume LXVIII, Issue 20846, 13 April 1931, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, APRIL 13, 1931. CROWN AND RATE LIABILITY.

i A question was asked and an answer given in Parliament just be- - fore the week-end adjournment, both with a most important bearing on the right of local bodies to recover rates on land over which the Crown holds a mortgage. The point at issue is intricate and involved. It was the subject of litigation in ■ the Supreme Coifrt and before the Court of Appeal. The judgment of the latter body was the basis of the question Mr. J. N. Massey asked. The reply of the Prime Minister showed that nothing will be done to alter a position that can easily end in an extra imposition on the individual property owner, as will presently be shown. It is unfortunate that the Court proceedings were so technical in character, for that fact has tended to obscure the very serious aspect of public policy involved —an aspect discussed by Mr. Justice Blair in the Supreme Court, but not mentioned in the judgment of the Court of Appeal. The case arose in the borough of Inglewood, Taranaki. A returned soldier was the registered owner of a piece of land in the borough, subject to a Crown mortgage to secure an advance. The facts, very briefly, were that the soldier fell into arrears with both his rates and his payments to the Lands Department. Eventually he abandoned the holding, leaving the demands of the Borough Council unsatisfied. The Crown never at any time actually took possession, but let the property on a weekly tenancy for grazing for a time. Later it was sold again by the Crown as mortgagee. The questions then arising were whether a judgment for unpaid rates could be enforced against land where the Crown was mortgagee, and whether the Crown, exercising its power of sale, could transfer the land to a second owner free of liability for unpaid rates. » Where land is subject to a private mortgage, given to a lender other than the Crown, liability for rates takes precedence of that mortgage charge. In the ultimate the local body levying the rates can force a sale, and the proceeds are used, first to meet the rating liability and then applied to other charges in their legal order of priority. The Court of Appeal has ruled, as the Prime Minister explained, that a Crown mortgage takes precedence over everything except arrears of general rates existing before the mortgage' was given, and special or separate rates created before that event. His answer to the question—obviously the work v of departmental hands — did not make the point clear. It seemed deliberately to obscure it. The crucial sentence ran: "Crown mortgages enjoy priority only over special rates and certain separate rates created after the mortgage was given, and over general rates levied after that date." The word "only,"

and the statement that the Appeal Court decision did not cast any disability on local bodies are absolutely misleading. The meaning of the decision is that local bodies have no effective power of recovering general rates where the Crown is mortgagee, except for arrears that may have existed before the mortgage was given. It means that for practical purposes the collection of special and separate rates cannot be enforced where they arc levied after the Crown became mortgagee. When, in addition, as Mr. Justice Blair pointed out, the mortgage given by a discharged soldier does not contain the usual covenant requiring the mortgagor to pay the rates, it becomes plain how heavily the scales are loaded against the local authority.' Mr. Justice "Blair proceeds: "The result of such an omission is that if the soldier mortgagor did not pay the rates the Crown could not ask him to do so, and as long as he paid his interest and instalments due to the Crown . . . the soldier mortgagor could ignore the demands pf the local body for its rates." This is the position which, according to the Prime Minister's answer,, casts no disability on the local body. The Courts interpret the law. If amendment is needed as a matter of public policy, it is for the Government and Parliament to act. The Prime Minister says no action will he taken, that all the Government lending _ departments—for the position affects much more than mortgages given by discharged soldiers —will retain the position of priority for their securities that the Appeal Court shows they enjoy. The Prime Minister gives this reason for his decision : "Lending by the Government is not for profit. Advances are for settlement and the welfare of the community, in which local bodies share." On this point, in the original judgment, Mr. Justice Blair said that if the Crown was exempt from provisions designed to protect local rates "then to the extent that the Crown makes advances over and above a safe margin sufficient to protect rates, these advances are being made, not at the expense of the Crown, but at the expense of the ratepayers." The point is incontrovertible. Local bodies must collect revenue to finance the services they give. If some property-owners escape payment, more must be levied on the unprivileged remainder. It is not, as the Prime Minister implied, a matter of local bodies co-operating in State operations for the welfare of the community. It resolves itself absolutely into a case of the State mortgagor being placed in a specially favoured position while others who have not succeeded in obtaining Government advances stand to suffer to a corresponding degree. Tt does not follow that all Crown mortgagors will immediately refuse to pay their rates. That is not the noint. The trouble is that the whole basis of local body finance is affected, as Mr. Massey has pointed out, and the principles involved cannot be dismissed so lightly as the Prime Minister endeavoured to do in answering his question.