STATE ADVANCES

New Zealand Times, Volume XXXVIII, Issue 8653, 11 February 1914, Page 10

STATE ADVANCES

THE INCREASED INTEREST RELIEF SHOULD BE SOUGHT FROM PARLIAMENT. An important judgment affecting the relations of local bodies with tho State-Guaranteed Advances Office ivas delivered by His Honour the Chief 'Justice (Sir Robert Stout) in the Supremo Court yesterday morning. The case was one brought by the Whanga■rei Borough Council against tho Superintendent of the Advances Office, ■asking for a declaratory decree (a) [that section 2 of tho New Zealand (State-Guaranteed Advances AmendliUent Aot, 1912, does not entitle the (defendant to increase tho rate of in-' iterost, payable in, respect of the third instalment of a loan, from 31 per cent, (per annum to 41 per cent, per annum; (b) that the plaintiff is entitled to have the balance of the loan advanced (to it at the rate of interest agreed Vip'ou -when the loan was granted, name--I.V) 31 per cent, per annum. The parties agreed upon a special case, in which the facts were set out. Two con-, jtenbions were set out as to the law (applicable to the facts, one by the plaintiff and ono by the defendant,, and His Honour,said the general ques-i ticn was, “Which contention is cor-i Irect?” ' “The facts are simple,” stated theChief Justice, in his judgment, “and, the question really is, have the plainItiffs the right to get the loan they! applied for, and which the board aud( the commissioners sanctioned, on the terms agreed to, or have'the statutes j [provided that the Government must, repudiate the agreement made and grant a loan on. new or other terras [different from those formerly agreed (to ? The Legislature is, counsel contended, not to be presumed to have declared that the contract made must ibo repudiated, but if the words of the (statute are plain effect must be given to them even if such effect should mean the repudiation of the contract.” i TERMS OF THE LOAN.

TKo loan was applied for on February 2nd, 1911, and was granted on February 15th. The terms and conditions were agreed to as follows: —(a) The amount of the loan .to be £19,200 ;i !{b) the term of the loan to be 301 'years; (c) the rate of interest to be 31 per cent, per annum; (d) the loan to jbe secured by a special rate of 25-30ths !of one penny in the £ over the whole' 'of the borough of Whangarei; (e) all statutory and other proceedings necessary for raising the loan to bo duly: jtaken. The acceptance was by tele-; 'gram. |

i “The first question raised,” said Hisj (Honour, ‘'is, was this a contract?”! 'Paragraph 12 of the regulations pux-j 'porting to be made under authority of itho New Zealand State Advances Act,! 1909, stated, “Every such notice of ae-l ceptance shall constitute a contract he-| 'tween the Superintendent and tho ( 'Corporation of the local authority to' 'grant and accept the loan in.accordance with the terms of the applica lion.” It was contended, however, by the defendant (1) That the regain-: lions were ultra vires. The power to i’mak’o regulations appeared in section. |lO4, and paragraphs (a), (1) and (in) (wore relied on. It was stated that, ;the Governor might by Order-in-' Council gazetted make regulations fori all or any of the following purposes:— (a) The conduct of the business of the Advances Office; (1) for anything iwhich by this Act is expressed to be prescribed, and generally; (m) for any object or purpose deemed necessary for: the efficient administration of the Act. “Under such a wide legislative power as is here conferred upon the Governor,” His Honour continued, “I amj of opinion he could prescribe that a', contract might be made without being' under seal, and also that the efficient administration of the office required a contract so- to be made, certainly by the local authority, for if no contract, was made, the local authority might! not accept the money; when raised,| and it can hardly he Suggested that; there was to be a unilateral contract' ; —that is, one binding the local bodies,! hut not binding the commissioner, tho| State officer that was to raise the loan and grant the money. I therefore rc-l iject the contention that the superin-: '.tendon* was bound to no tiling and could not contract.” IS THERE AH ANOMALY?

His Honour went on to say that the question in the case was, “What has been the effect of the recent legislation—that is, of the New Zealand .State Guaranteed Advances Amendment Act, 1912 and the State Advances Act, 1913?” Only two installments of the loan had been paid when fthe 1912 Act had been passed. Section 2 of that Act amended the principal Act by making the rate of interlest charged pne-eighth per cent, per (annum more than the rate at which I the money was raised. His Honour [said that this could not affect, at-all | events, the part of the loan raised and 'paid. It was said that subsection 3 'of section 2 made it apply to all loans to be paid or part (thereof to be paid. It seemed to His Honour that to hold that the subsefction w-as Hot to apply to a loan granted and not paid would be to strike out part l of subsection 3. No doubt the court ought not to assume that the Legislature would seek to vary an existing contract or to repudiate tin existing agreement. If the words were plain and went so far, the court must so interpret the law. If a wrong had been done, it was for the Legislature to grant a remedy. The court was powerless to do so. “NO RIGHT OH ACTION.” “I assent,” added His Honour, “to all that Mr Skorrett has said as to courts presuming that the Legislature wall not violate contracts or repudiate agreements. The question the court has to settle is: Do the words plainly and without doubt vary an existing contract? I am forced to the conclusion that that is the effect of subsection 3 of section 2, nor • can I spell out of that section any ■ other meaning. Section 3 helps, if help is required, in the construction I have put on subsection 3 of section 2. And, as if conscious that a wrong had been done to a local body—which, if it had been between citizens, would have led to an action for damages for breach of contract —the Legislature has passed subsection 3 of section 3, which is as f.ollows; —-‘(2) A local authority shall have no right of action against the superintendent for breach of contract or otherwise in respect of the failure of the superintendent to advance to that local authority any monevs at the rate of interest at which

lho application for such moneys was finally granted by tho’board.’ ‘•The Legislature, in fact, says if it has provided that the superintendent shall repudiate a loan on the terms granted and thus a breach of contract has been committed, nevertheless a local authority shall have no right of action against tho Commissioner.” Since the 1 commencement of this action there had been passed a further statute, dealing with advances, the Local Bodies’ Loans Act, 1913, No. 30, which came into force on December 4th. By section 68 of the 1913 Act, the rate of interest was made 4-J- per cent, per annum, or one-eighth per cent, per ’ annum more than the rate at which the money was raised (whichever was the greater). ‘This paragraph,” the enactment “shall apply to all loans, or to any part thereof, paid to a local authority on or after the commencement of this Act, whether the application for such loan was finally granted before or after that date. Nothing in this paragraph shall affect the rate of interest payable on any loan or part of a loan paid to a local authority after the passing of tho New Zealand State Guaranteed Advances Amendment Act, 1912, and before the passing of this Act.” His Honour had said he accepted Mr Skerrett’s statement of the law that if the wording of the amending Acts was doubtful or ambiguous, then the court should not read the statute as violating engagements. His Honour, however, was of opinion that tho wording of both the 1912 Act (section 2) and the 1913 Act, No. 30, section 68 and section 69, was too plain, and effect must be given to the words of the statute. There had not been _ reenacted the provision of subsection 2 of section 3 of the 1913 Act, but when this action was commenced, ’it was then in forca. MATTER FOB LEGISLATURE.

In conclusion, Hia Honour said he was of opinion that the plaintiff was without legal redress against the superintendent. No doubt, tho plaintiff was not, however, without remedy if ho had suffered any injury, as the plaintiff could apply to the Legislature which had altered the arrangement made between the plaintiff corporation and the Advances Office, and the Legislature had ample power to grant redress. It was not necessary for him to consider the matter from the point of view urged by the Solicitor-General, namely, that the giving of loans to local bodies was a benefaction, and consequently no local body could claim any relief from a refusal to lend, as the loan was a mere gift. That, the Legislature would no doubt consider if the plaintiff sought relief from it. At tho hearing, Mr C. P. Skerrett, K.C., and Mr G. H. Fell appeared for the plaintiff, and tho SolicitorGeneral (Mr J. W. Salmond, K.C.) for the defendant.