INTEREST ON LOANS

New Zealand Herald, Volume LXX, Issue 21597, 15 September 1933, Page 11

INTEREST ON LOANS

DOMINION POWER BOARD LITIGATION IN SYDNEY SYDNEY. Sept. 14' The hearing was begun to-day in the Equity Court, Sydney, before actingChief Justice Harvey, of a suit on behalf of the Wanganui-Rangitikei Power Board for a ruling as to whether the New South Wales Interest Reduction Act, 1931, applies to the financial obligations by that board to the Australian Mutual Provident Society on and after October 1, 1931. A second issue is whether the plaintiff is entitled to redeem debentures due since that date upon payment to the society of the total capital included in such debentures, together with interest reduced in accordance with the Act. Plaintiff contracted loans of £149,999, £IOO,OOO and £60,000 at various periods between 1924 and 1926. The interest was 51 per cent, and all the debentures were payable in Sydney. Plaintiff claims to be entitled to the reduced rate of interest of 3 per cent prescribed in tho New South Wales Interest Reduction Act on all interest obligations after tho date of the passing of the Act, which contention tho defendant society disputes. The hearing was adjourned.

Tho decision in the case to test the claim of New Zealand local authorities with loans domiciled in New South Wales to benefit by the New South Wales Act reducing interest by 22% per cent will be awaited with interest. A ruling that New Zealand local body debtors must take advantage of the Australian legislation was given 18 months ago by the Auditor-General, Mr. G. F. C. Campbell. Local bodies have since acted in that way, pending determination of the legal position by the Court. The Auckland ElectricPower Board, for instance, has in-, structed the Bank of New Zealand in Sydney to pay interest to the Australian Mutual Provident Society, less 22} per cent, and to hold tho until the dispute has been settled. Similarly, the Waitemata Electric-Power Board has adopted the procedure of paying the disputed portion of the interest into a suspense account. As far as tho New South Wales position is concerned, it was arranged that the Wanganui-Rangitikei ElectricPower Board should appear in the present test case to determine, the liability i'or payment of interest in full. As large sums are involved, it has been suggested that, whatever the decision, the case will probably bo taken by either side to tho Privy Council, and it may be several years before a final decision is given. The Waitemata Elec-tric-Power *Board raised a loan of £200,000 from the Australian Mutual Provident Society in Sydney, and a reduction of 22} per cent in interest represents £2600 a year. The delay in taking the case to Court apparently was due to doubt as to, which side would take tho initiative.