FINANCES OF THAMES

New Zealand Herald, Volume LXIX, Issue 21249, 1 August 1932, Page 10

FINANCES OF THAMES

hopelessly insolvent «AN ORGY OF BORROWING" DIMINISHING SECURITIES PUBLIC TRUST INVESTMENTS [llY TELEGRAPH —OWN CORRESPONDENT] WELLINGTON, Saturday The opinion that the Thames Borough Council lias indulged in an orgy of borrowing for public works purposes is expressed by Mr. Justice Ostler, in his written judgment on the litigation in connection with the borough affairs heard by Ilis Honor in tho Supreme Court this week. Four petitions were filed by debentureholders under loans issued by tho Thames Borough Council praying for tho appointment of a receivor under section 48 of tho Local Bodies Loans Act. 1926. In respect of a streets improvement loan of £70,350 and a sanitary works loan of £98,000, the borough had made default in the payment of interest since October, 1931, its position being affected by tho depression and other factors. His Honor refused the applications in tho meantime, and adjourned tho petitions for a month to enable tho Gov-crnor-General-in-Council, if ho sees fit, to appoint a commissioner under tho Thames Borough Commissioner Act, 1932.

"Tho facts of tho case are, briefly, that the Thames Borough Council has, during tho last 10 years, indulged in an orgy of borrowing for tho purpose of constructing public works within the borough," stated His Honor, in his written judgment. "It is unnecessary to Rive the detailed history of the loans which have been raised, but it may be stated that in 1921 the unim- . proved value of ratable land in tho borough was over £283,000, and the total debt of the borough was about £40,000, or about £l4 to every £IOO of unimproved value. To-day tho ratable value of unimproved land in the borough has sunk to about £107,000, but the total amount of loans raised by the borough, and secured on rates payable in respect of unimproved value, is no less a sum than £250,000, and, in addition, tho Thames Harbour Board has raised £60,000, secured by borough rates, so that there is a total debt of £2OO for every £IOO worth of unimproved value. "It will thus be seen," said His Honor, "that, whilo the loans have been steadily mounting up, tho value of security offered for them has been just as steadily diminishing, until tho borough*is at the present timo hopelessly insolvent and unable to meet its liabilities, and has rnado default in tho payment of interest due under its loans."

His Honor pointed out that since 1924 there had been no issues of loans taken up by tho public except a small loan of £575 by tho Australian Mutual Provident Society, and one of £12,000 by A. and G. Price, Limited, both in 1925. "With these exceptions, all the m< : y borrowed by the borough since 1924 has been lent by Government departments, chiefly by tho Public Trustee, who has invested no less than £130,000 out of the Common Fund in Thames borough securities. It 6eenis inevitable that the Common Fund will suffer a heavy loss in this investment." Tho opinion held by Ilis Honor was that, if a receiver wero appointed and subsequently the Governflr-General-in-Council appointed a commissioner, the latter appointment would immediately render tho receiver powerless. Ho could take no stop to eiiforco tho payment of interest. It would bo futile to appoint a receiver if his powers were liable to be destroyed immediately in that way.