LOCAL BODIES' FUNDS

New Zealand Times, Volume XLIX, Issue 11172, 30 March 1922, Page 4

LOCAL BODIES' FUNDS

MUST BANKS GIVE CREDIT? COUNCILS MUST FIND FINANCE, says chief justice. “ERA OF FORCED LOANS.” Cf great importance to local bodies and bunks was an oial judgment delivered by the Chief Juslice (.Sir Robert Stout) in the Supreme Court yesterday morning, on an originating summons by the Kiwitea County Council (plaintiff) and the Bank of New Zealand (defendant), summoned for a declaratory order under tbfe “Declaratory Judgment Act-, 1908,” interpreting section 45 of the Finance Act, ti'zO

The question involved was whether section 45 of the Finance Act, 1920, commanded the bank to pay the cheque of ithe plaintiff county when drawn on the county fund account at the bank, ior the purpose of replacing in the loan accounts, monies transferred from the loan accounts to tbe county fund account; notwithstanding chat if the cheque so drawn be paid by the bank, the overdraft in the county fuiid account will be in excess cf the limit for borrowing fixed by the bank. PROVISIONS OF SECTION. Section 45, of Ithe Finance Act, 1920, provides that any local authoiity may, in anticipation of its revenue temporarily transfer to its general account any balance of Ithe loan account or any part thereof on such terms as the Governor-General in Council may authorise. Tho money so transferred shall be deemed to he tho liability ot the general account and shall he repaid to tho loan account from which the transfer was made within the same financial year. Mr P. 3. K. Macassey, instructed by Hvggitt and Elliot, of Feilding, appeared for the plaintiff County Council. Mr A. Do B. Brandon, senr., and Mr D. R. Hoggard appeared for the Bank of New Zealand, and Mr J. Prenderyille for the Attorney-General, as representing local authorities generally.

MR MACASSEY’S CONTENTION. Mr Macassey contended that prior to section 45 being enacted local bodies could only place monies to the credit of their loan accounts for the purposes for which the monies were borrowed,' or the Joan monies could be placed on fixed deposit. Section 45, no held, was passed uo meet this position. Local bodies had overdrafts with hanks to meet current expenses which would be paid off out of revenue. Local boHiea had to pay interest on their overdrafts, whereas local bodies might be in ere lit in their lean account in a‘'considerable sum of money, and no interest was allowed by the hanks thereon.

“SPECIALLY ‘EAR-MARKED.’ ” Mr Macassey further contended that the monies were specially ‘ ‘eai - marked” by Ordvr-in-Gouncil, and were expressed as “trust” in tho statute. There was a liability on the general account to repay this money hack to the various loan .accounts, laid that the hank had knowledge of the transfer and were hound to see that these monies “were repaid. .

NOT “TRUST” MONIES. Mr, Brandon maintained that section 45 merely gave power to the local body to transfer .monies from the loan account into its district fund account for the use of the county council That these monies were not trust monies, as they belonged to the plaintiff county. ' Section 45 did not express any or impose obligation on 'the bank to see that these monies were repaid. Mr Hoggard followed on practically the same lines. A NEW DEPARTURE. Mr Prendeville ppinted out that section 45 was a new departure in local body law in, respeot .to finances of local bodies. He maintained that power was given to the local body ( to transfer moneys on loan account—with the consent of Govemor-General-in-Council —into tho general account, and as such consent ad been obtained, the hank could not refuse to honour cheque®. ' HIS HONOUR’S JUDGMENT. '“Where-is'the statute requiring s bank to give, credit' to' w local authority?” asked His Honour, in pronouncing judgment. “There is none. There is no contraot binding the bank to give credit to the local authority. The stattute doea hot purport to,, deal with the relationship between a local authority and its banker; it does not purport to oast-any responsibility _upon the bank at all. The responsibility is cast upon tile local authority to do a certain thing, ’ and the local authority must find the funds for the purpose. They cannot compel a bank to give them finances to enable them to comply with the provisions of the statute. There is nottung in the statute whatever to that effect, and surely tho court cannot presume that the Legislature intended to force the bank to lend money to a local authoriy.

“The.era of forced loans, I thought, had expired with the Stuarts, and if the contention put forward was held to he the law this would he a forced loan, which, would he unique in the history of British legislation, and I cannot assume that the Now Zealand Legislature intended to force the banks or loan companies to give finance to a local body to enable it to pay its debts. .

“I am strongly of opinion that there is nothing in the statute to enable the court to say tliat a bank is hound to giyen any finance to a local bodv at all. That is a matter of contraot between it and the hank. If a bank has pledged itself to give the finance then they can be sued if they do not cany out their contract, hut there is no suggestion, of that here. I am therefore of opinion that the question in the originating summons must be answered, 'That the hank is not hound to mane advances.’ As'the parties have agreed on the question of costs no order is made.”