APPEAL FAILS

New Zealand Herald, Volume LXXIV, Issue 22864, 20 October 1937, Page 15

APPEAL FAILS

MT. ALBERT BOROUGH PRIVY COUNCIL DECISION LOCAL BODY LOANS CASE EFFECTS OF JUDGMENT By Telegraph—Press Association—Copyright LONDON. Oct. 18 The Judicial Committee of the Privy Council has dismissed the appeal of the Mount Albert Borough Council, Auckland, from a decision of the New Zealand Court of Appeal in favour of the Australasian Temperance and General Life Assurance Society, Limited. The appeal was a test case taken to determine the effect of certain Victorian State legislation, passed during the depression, upon advances made by Victorian companies to local bodies in New Zealand. It affects at least 23 local bodies and considerably more than £1,000,000 of debt. Certain preliminary questions were removed from the Supreme Court to the Court of Appeal, which decided that the proper law of contract applicable was the law of New Zealand. It was from this decision that the Mount Albert Borough Council appealed to the Privy Council. Debentures issued for £1,185,000 by 23 local bodies in New Zealand, at rates of interest varying from 5$ per cent to per cent, are affected by the judgment of the Privy Council. In outlining the case yesterday, the Mayor of Mount Albert, Mr. H. A. Anderson, said the council had issued debentures amounting to £130,000, bearing interest at £5 13s 9d, to the Australasian Temperance and General Life Assurance Society, Limited, in respect of money advanced for certain works. When local body loans were being converted in the Dominiou in 1932 and 1933 the council approached the society regarding a conversion of its loan, as the New Zealand statutes gave no authority for local bodies to convert loans domiciled out of New Zealand, the principal and interest on the society's loan being payable at Melbourne. No progress was made. Mr. John O'Shea, counsel for the Municipal Association of New Zealand, submitted an opinion early in 1935 that the Financial Emergency Act, 1931, Victoria, and other Victorian statutes relating to interest reduction, were applicable to the debentures. Therefore the council, in 1935, paid interest at only 5 per cent, and withheld payment of an account which it claimed had been overpaid for interest from October 1, 1931, when the Act mentioned above came into force. Many other local bodies had issued debentures to institutions in Victoria, and on the same advice adopted Mount Albert's attitude in interest payments. By amicable arrangement the societycommenced an action against the council, as the nominal defendant, in the Supreme Court of New Zealand, to decide whether the Act was applicable to the debentures. Other local bodies cooperated with the Mount Albert council in the defence. Judgment was given for the society, but leave to appeal to the Privy Council was obtained. The Municipal Conference decided in March, 1937, that Mr. O'Shea should appear before the Privy Council oh behalf of the Mount Albert Borough Council and other local bodies and conduct the appeal. If the appeal had succeeded it would have meant an annual saving in interest charges of £1543. to the Mount Albert Borough,, and the amount by which the council could have reduced the rates on average household property would hare been between ,5s and 6s a year. Other local bodies concerned, and the amounts of their the time of the Supreme Courts-hearing, were:— Auckland City Council, £99,000; Hawke's Bay Power Board, £200,000; Grey Power Board, £83,000; Lower Hutt Borough Council, £59,300; and Wellington City Council, £12,300.