OVERSEAS LOANS

New Zealand Herald, Volume LXX, Issue 21471, 20 April 1933, Page 12

OVERSEAS LOANS

INTEREST PAYMENT IMPORTANT JUDGMENT EXCHANGE NOT COMPULSORY ■ u■ ; v >'! MAY AID LOCAL BODIES • A judgment of the English Court of Appeal which may have an important bearing on the finances of many Now Zealand local bodies was brought before the Auckland Transport Board yester- ' day: The judgment deals with the Australian case'of Broken Hill Proprietary versus Latham and others and the Court, by a two to one majority, decided that where a debenture issue is, at the option of the ho'ders, payable as regards principal and interest in cither Australia or London, and the holders elect to be paid in London, payment may b3 made in Australian currency, to be converted into sterling at the current rate ol exchange. < The effect of the judgment is to save the Broken Hill company the exchange penalty which formerly had to be carried when English holders elected to bo paid in London in sterling, and the suggestion was made yesterday that the judgment will come to bo regarded as a precedent to be followed with corresponding advantage to New Zealand local body budgets. It was announced, however, when the judgment was delivered that the case would pro- / / ,1 bnbly bo ; carried to the House of Lords. Transport Board's Loans

"It apparently means," said the chairman of the Transport Board, Mr. J. A. C. Allum, "tlia® as far as our £1,250,000 loan is concerned we shall not have to pay tho 25 per cent exchange on interest remittances to London." The loan was payable, he said, both as regards, principal and interest in New Zealand or Loudon at the option of the holders for the time being. At presont interest amounting to £48,177 a year was paid in London on £931,900 of the loan. Other tramway loans- raised in London amounted to and the interest paid amounted to £31,625. "With the bank exchange at 25 per cent, it is obvious that the decision of the Court of Appeal is of the greatest importance to the board," said Mr. Allum. "1 recommend that tho matter be further investigated and any necessary steps taken to protect tho board's interests." Mr. G. R. Hutchinson said he was rbt very optimistic concerning tho application of tho judgment to the Transport Board's loans. "I doubt if we . could avoid having to pay in British ' currency," ho said. Paying in New Zealand Pounds The chairman said the judgment wade it perfectly plain that as far jis the Broken Hill company was concerned debenture-holders would henceforth be paid in Australian currency only. One judge dissented, but the concurrence of the other two judges made the decision binding. "It is clear to rne that our £1.250,000 loan is on a. par with the Broken Hill Proprietary's! capital and that there is no obligation for us to pay more than New Zealand pounds," he ad.ded. "In other words, there is no need for us to pay the 25 per cent exchange." The matter was of somo delicacy, continued Mr. Allum, but he proposed to consult immediately with the Mayor and the board's solicitors with a view to obtaining cO-operation between tho City Council and the board in notifying overseas lenders that, in so far as they required payment to be made in England, the Auckland local bodies would pay only in New Zealand currency.. Speedy action was desirable, because! the Transport Board would have to make an overseas payment on July 1. "Far-Beaching Effect" Mr. H. G. R. Mason said it was no 1; only in the interests of the board':? finances to accept the Court of Appeal's precedent, but it was encumben t upon them to do so. The board waii - the trustee and servant of the people and could not give away sums by way of exchange that were not legally due. "The' Auditor-General would be very Eevere on us if we paid exchange when *'4 are not entitled to," he added. "In spite of the difference of opinion among the Judges 1 do not think the judgment could be easilj' upset." "This is going to have a far-reaching effect and 1 am inclined to think the banks will have something to say about it," remarked Mr. G. Grey Campbell. It was decided that the chairman should further investigate the position and confer with the Finance Committee.